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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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NTL COMMUNICATIONS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4899 52-1822078
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
</TABLE>
<TABLE>
<S> <C>
RICHARD J. LUBASCH, ESQ. COPY TO:
EXECUTIVE VICE PRESIDENT, THOMAS H. KENNEDY, ESQ.
GENERAL COUNSEL AND SECRETARY SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
NTL COMMUNICATIONS CORP. 919 THIRD AVENUE
110 EAST 59TH STREET NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10022 (212) 735-3000
(212) 906-8440
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE
REGISTERED AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE(2)
PRICE(1)
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9 1/4% Series B Senior Notes
due 2006................................... E250,000,000 100.000% E250,000,000 $66,877.80
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9 7/8% Series B Senior Notes
due 2009.................................. E350,000,000 100.000% E350,000,000 $93,628.92
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11 1/2% Series B Senior Deferred
Coupon Notes due 2009..................... E210,000,000 57.333% E120,399,300 $32,208.16
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(1) Estimated solely for the purposes of calculating the registration fee.
(2) Calculated using an exchange rate of $1.0133 = E1.00 being the noon buying
rate on January 20, 2000.
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THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer
or sale is not permitted.
Prospectus
Subject to completion, preliminary prospectus dated January 24, 2000
Offer to Exchange
NTL COMMUNICATIONS CORP.
9 1/4% SERIES B SENIOR NOTES DUE 2006
9 7/8% SERIES B SENIOR NOTES DUE 2009
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2009 [NTL LOGO]
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We are offering to exchange:
- an aggregate principal amount of up to E250,000,000 of our new 9 1/4%
series B senior notes due 2006 for a like amount of our old 9 1/4% senior
notes due 2006.
- an aggregate principal amount of up to E350,000,000 of our new 9 7/8%
series B senior notes due 2009 for a like amount of our old 9 7/8% senior
notes due 2009.
- an aggregate principal amount of up to E210,000,000 at maturity of our
new 11 1/2% series B senior deferred coupon notes due 2009 for a like
amount of our old 11 1/2% senior deferred coupon notes due 2009.
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- The exchange offer expires at 5:00 p.m., New York City time, on
, 2000, unless we extend it.
- We have applied to list the new notes on the Luxembourg Stock Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF RISK FACTORS
THAT YOU SHOULD CONSIDER BEFORE DECIDING TO TENDER YOUR OLD NOTES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January , 2000.
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Until , 2000, which is 90 days after the date of this
prospectus, if you are a dealer effecting transactions in the new notes, whether
or not you participate in the exchange offer, you may be required to deliver a
prospectus. This obligation is in addition to your obligation if you are a
dealer to deliver a prospectus when acting as an underwriter and with respect to
any unsold allotments or subscriptions.
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In this offering memorandum, "NTL," the "company," "we," "us" and "our"
refer to NTL Communications Corp. and its consolidated subsidiaries except where
we expressly state that we are only referring to NTL Communications Corp.
We confirm that the information contained in this prospectus in relation to
our company and our subsidiaries and the notes is true and accurate in all
material respects and is not misleading in any material respect. Any opinions
expressed in this prospectus on the part of our company are honestly held or
made and this prospectus does not omit to state any material fact necessary to
make such information and opinions (in such context) not misleading in any
material respect. All proper enquiries have been made to ascertain and to verify
that information. We accept responsibility for the information contained in this
document accordingly.
You should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not making an offer of the new notes in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover of
this prospectus only. Our business, financial condition, results of operations
and prospects may have changed since that date.
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EXPLANATORY NOTE REGARDING CORPORATE RESTRUCTURING OF NTL
On April 1, 1999, NTL Incorporated completed a corporate restructuring to
create a new holding company structure. The restructuring was accomplished
through a merger under section 251(g) of the Delaware General Corporation Law.
At the effective time of the merger, all stockholders of NTL Incorporated became
stockholders in the new holding company and NTL Incorporated became a wholly
owned subsidiary of the new holding company. The new holding company took the
NTL Incorporated name and the old NTL Incorporated was renamed NTL
Communications Corp. The annual report and periodic reports filed with the
Commission before April 1, 1999 and which are referred to and incorporated by
reference in this prospectus do not reflect this name change.
The new holding company's stock trades under the same NTLI symbol on the
Nasdaq National Market with the same CUSIP number. In the merger, all
outstanding shares of old NTL Incorporated were converted into shares of the new
holding company with the same voting powers, designations, preferences and
rights, and the same qualifications, restrictions, and limitations, as the
shares of old NTL Incorporated.
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At the effective time of the merger, the only material asset of the new
holding company was the capital stock of NTL Communications Corp. and it had no
material liabilities.
NTL Incorporated has no obligations under the notes.
Our principal executive office is located at 110 East 59th Street, New
York, New York 10022 and our telephone number is (212) 906-8440. Our World Wide
Web address is www.ntl.com. The information on our website is not incorporated
by reference into this prospectus.
In this prospectus, references to "pounds sterling," "L" "pence" or "p" are
to the lawful currency of the United Kingdom and references to "U.S. dollars,"
"dollars," "$" or "c" are to the lawful currency of the United States. For your
convenience only we have translated some pound sterling amounts into U.S.
dollars and some U.S. dollar amounts into pounds sterling. We are not making any
representation to you regarding those translated amounts. Unless we otherwise
clearly indicate, the translations of pounds sterling into U.S. dollars have
been made at $1.6595 per L1.00, the noon buying rate in The City of New York for
cable transfers in pounds sterling as certified for customers purposes by the
Federal Reserve Bank of New York on December 31, 1999. On January 20, 2000, the
noon buying rate was $1.6538 per L1.00.
Before January 1, 1999, the pound sterling was a part of the European
Monetary System exchange rate mechanism known as the EMS. Within the EMS,
exchange rates fluctuated within permitted margins, fixed by central bank
intervention. In accordance with the provisions of the Treaty on European Union
negotiated at Maastricht in 1991 and signed by the then 12 member states of the
European Union in early 1992, a European Monetary Union, known as the EMU,
superseded the EMS on January 1, 1999 and the euro was introduced as the single
European currency. Since that date, the euro has been the lawful currency of the
EMU states. The following 11 member states participate in the EMU and have
adopted the euro as their national currency: Austria, Belgium, Finland, France,
Germany, the Republic of Ireland, Italy, Luxembourg, The Netherlands, Portugal
and Spain.
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PROSPECTUS SUMMARY
This summary highlights information about us and the exchange offer that is
contained elsewhere in, or incorporated by reference in, this prospectus. This
summary does not contain all of the information that may be important to you.
You should read the entire prospectus carefully, including the documents
incorporated by reference, before making a decision to exchange your old notes.
ABOUT NTL
We are a leading broadband communications company in the United Kingdom and
the Republic of Ireland with approximately 2.2 million customers, including
internet service customers. We provide residential, business and carrier
customers with a broad array of competitive communications products and
services, including the following:
- RESIDENTIAL SERVICES, including telephony, cable television, personal
computer and television-based internet access and interactive services;
- NATIONAL TELECOMS SERVICES, including business telecoms, national and
international carrier telecommunications, internet services and satellite
communications services; and
- BROADCAST TRANSMISSION AND TOWER SERVICES including digital and analog
television and radio broadcast transmission services, wireless network
management and tower site rental services.
Our objective is to focus on customer service and the development of
product offerings that emphasize value rather than simply price discounts. Our
product offerings incorporate our fundamental customer proposition:
"to allow our customers to buy what they need and pay for what they use"
We believe that this simple construct has allowed us to achieve the
industry leading customer penetration (47%) and customer retention levels
(approximately 1% churn per month) within the franchises that we have been
developing since 1993. In 1998, we expanded our consumer services through the
national offer of our television internet and indirect access telephony
services. This product allows us to serve over 18 million British
Telecommunications customers that will not be passed by our local broadband
network infrastructure.
We provide our broad range of services over local, national and
international network infrastructure. This network infrastructure consists of:
- BROADBAND COMMUNICATIONS NETWORKS that currently pass approximately 4.3
million homes and will be expanded to cover the nearly 5.9 million homes
in our regional UK franchise areas and the Republic of Ireland. These
high-capacity two-way local broadband fiber networks serve entire
communities throughout these regional franchise areas. Our fiber optic
cables pass most businesses in our regional franchise areas and are
connected to nodes which are typically within approximately 500 meters of
each of the 600 homes typically served by each node. Each home is
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then connected by a "Siamese" cable consisting of two copper pair
telephone wires and a coaxial cable, allowing us to deliver telephone,
cable television and internet services over a single integrated network.
This "Siamese" cable also allows us to deploy both cable modems and
digital subscriber line technology for the provision of broadband
communications services.
- A NATIONAL/INTERNATIONAL SYNCHRONOUS DIGITAL HIERARCHY (KNOWN AS SDH)
FIBER OPTIC TELECOMMUNICATIONS NETWORK which connects all of the major
population centers in the UK to Ireland, Continental Europe and the
United States. This self-healing, fully redundant backbone network
utilizes Asynchronous Transfer Mode (known as ATM) technology and was
built with sufficient duct capacity to accommodate over 2,300 fibers on
the majority of its routes. We have designed this network to allow us to
place the active components such as routing devices at its edge and close
to our customers. We believe this design should ultimately reduce our
costs and increase our ability to offer a broad range of voice and data
solutions.
- NATIONAL BROADCAST TRANSMISSION AND TOWER NETWORK INFRASTRUCTURE in the
UK, which provide national, regional and local broadcast and wireless
communications coverage and is comprised of over 1,450 tower sites in the
UK.
On April 1, 1999, we completed a corporate restructuring to create a
holding company, which took our original name "NTL Incorporated". The holding
company was created to pursue opportunities outside of the United Kingdom and
Ireland.
NTL Communications Corp. was incorporated on April 2, 1993 under the
General Corporation Law of the State of Delaware.
RECENT DEVELOPMENTS
ACQUISITION OF AUSTRALIAN NATIONAL TRANSMISSION NETWORK BY NTL INCORPORATED
On April 30, 1999, a subsidiary of NTL Incorporated acquired the Australian
National Transmission Network for an aggregate purchase price of approximately
$425.5 million, including related expenses. While NTL Incorporated ultimately
intends to finance the purchase price by a separate financing, the funds
necessary to pay the purchase price for the Australian network were obtained
from a distribution by us to NTL Incorporated.
ACQUISITION OF IRISH CABLELINK
In May 1999, we announced our first broadband venture outside the UK with
the acquisition of Cablelink Limited, Ireland's largest cable television
provider. Telecom Eireann (now named Eircom) and Radio Telefis Eireann announced
NTL as the successful bidder after a competitive tendering process. In July
1999, we acquired Cablelink for approximately 535.18 million Irish punts
(approximately $701.0 million, including related expenses). We secured a bridge
facility for the full purchase price. The proceeds of the offering of the old
notes were used to repay in full the bridge facility.
Cablelink provides multi-channel television and information services in
Dublin, Galway and Waterford. With a customer base of over 360,000 subscribers,
Cablelink
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currently has an 83% penetration rate in its cable broadband network which
passes 420,000 homes. Cablelink holds licenses to provide analog and digital
television services in its franchises for 15 years, with exclusive rights for
five years as of the beginning of 1999. It also has a full service license
allowing it to provide public telephony, internet and other value-added services
throughout Ireland.
ACQUISITION OF BT CABLE FRANCHISES IN WESTMINSTER AND MILTON KEYNES
In July 1999, we acquired broadband cable franchises located in
Westminster, London and Milton Keynes from British Telecommunications plc for an
aggregate of L19.0 million (approximately $31.2 million). We expect to invest
approximately L15.0 million (approximately $24.7 million) to upgrade the
networks for digital cable, interactive service and high speed internet access.
In addition, we paid British Telecommunications L5.0 million (approximately $8.2
million) on closing and will pay up to L14.0 million (approximately $23.0
million) on completion of the upgrade of the Westminster network. We lease the
networks from British Telecommunications on a long term basis for an annual
lease payment of approximately L3.9 million (approximately $6.4 million).
ACQUISITION OF WORKPLACE TECHNOLOGIES BY NTL INCORPORATED
In September 1999, NTL Incorporated acquired substantially all of the
shares of Workplace Technologies plc, one of the UK's leading data network
service integrators, for cash of approximately L96.6 million (approximately
$158.3 million) and loan notes of approximately L4.5 million ($7.4 million). NTL
Incorporated currently expects to transfer Workplace to us in the first quarter
of 2000.
NTL INCORPORATED'S AGREEMENT TO ACQUIRE THE CONSUMER CABLE TELEPHONE, INTERNET
AND TELEVISION OPERATIONS OF CABLE & WIRELESS COMMUNICATIONS PLC WITH THE
SUPPORT OF FRANCE TELECOM
In July 1999, our parent company NTL Incorporated agreed, with the support
of France Telecom, to acquire the residential cable, business cable, indirect
residential telephony, residential internet and digital television development
and services business of Cable & Wireless Communications plc, referred to as CWC
ConsumerCo. NTL Incorporated has proposed to acquire CWC ConsumerCo for
approximately 68 million new shares of NTL Incorporated common stock and L2.85
billion in cash. NTL Incorporated will also assume approximately L1.9 billion of
CWC ConsumerCo's net debt, plus further debt up to an agreed amount of CWC
ConsumerCo cash outflow between March 31, 1999 and the closing of the
acquisition. The bringing together of NTL Incorporated and CWC ConsumerCo will
create the largest cable telephone and television company in the United Kingdom
and Ireland with more than 2.8 million customers. This acquisition is subject to
both regulatory and shareholder approvals and is not expected to close for
several months. On November 12, 1999, the U.K. Secretary of State for Trade &
Industry announced that the acquisition would be referred to the Competition
Commission under the provisions of the Fair Trading Act of 1973, despite the
contrary recommendation of the Director of Fair Trading not to refer the matter.
The stated report date of the Competition Commission is February 25, 2000.
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In conjunction with this acquisition, France Telecom agreed to invest a
total of $5.5 billion in NTL Incorporated, which includes an initial investment
of $1.0 billion completed in August 1999. Under the terms of the France Telecom
investment, France Telecom will invest $2.5 billion in NTL Incorporated common
stock issued at $74 per share and $2.0 billion of convertible preferred stock
with a 5% dividend. Each share of the 5% preferred stock would be convertible
into 10 shares of NTL Incorporated common stock (subject to antidilution
adjustments). The initial investment completed in August represented
approximately 3.4 million shares of that common stock and 750,000 shares of that
preferred stock. Jean-Louis Vinciguerra, France Telecom's Senior Executive Vice
President and Chief Financial Officer, joined NTL Incorporated's board of
directors, at the time of completion of the initial investment.
As the acquisition is currently structured, CWC ConsumerCo will not become
a subsidiary of ours on closing of the transaction. Together with NTL
Incorporated, we are currently evaluating from an operating, financial and legal
perspective the feasibility and desirability of making CWC ConsumerCo a
subsidiary of ours in the future. As of the date of this prospectus, no decision
has been made regarding this issue. We cannot currently predict when we will
complete our evaluation or what the result of our evaluation will be. In
connection with the transaction, together with NTL Incorporated, we have
obtained a financing commitment for up to approximately L2.38 billion to fund a
portion of the cost of the acquisition. However, it is currently anticipated
that only NTL Incorporated will be the borrower under that bridge financing. We
cannot assure you that the proposed transaction and financing structure will not
change.
SALE OF INTEREST IN CABLE LONDON
In August 1999, Telewest Communications PLC exercised its right to purchase
all of our shares of Cable London PLC and all of our related rights and
interests for a purchase price of approximately L428.0 million (approximately
$704.7 million) in cash. We established the purchase price pursuant to a
buy/sell agreement between the parties. The sale was completed on November 21,
1999. The sale of our shares of Cable London PLC is an "Asset Sale" for the
purposes of the indentures for some of our indebtedness. The proceeds of the
sale were used to purchase Cablelink from another member of the NTL group, in
satisfaction of our obligation to invest in "Replacement Assets" under the terms
of the indentures for some of our indebtedness.
ACQUISITION OF ADDITIONAL NTL INCORPORATED COMMON STOCK BY FRANCE TELECOM
On October 25, 1999, NTL Incorporated announced that France Telecom agreed
to purchase approximately 3.4 million shares of NTL Incorporated common stock
from NTL Incorporated stockholders who received the shares as consideration in
an acquisition that was completed by NTL Incorporated in the first quarter of
1999.
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THE EXCHANGE OFFER
Notes offered................. We are offering up to:
- E250,000,000 principal amount of new 9 1/4%
series B senior notes due 2006;
- E350,000,000 principal amount of new 9 7/8%
series B senior notes due 2009; and
- E210,000,000 principal amount at maturity
of new 11 1/2% series B senior deferred
coupon notes due 2009
The series B notes have been registered under
the Securities Act.
The exchange offer............ We are offering to issue the new notes in
exchange for a like principal amount at
maturity of your old notes. For procedures for
tendering, see "The Exchange Offer."
Tenders, expiration date;
withdrawal................. The exchange offer will expire at 5:00 p.m. New
York City time on , 2000 unless we
extend it. If you decide to tender your old
notes in the exchange offer, you may withdraw
them at any time before , 2000. If
we decide for any reason not to accept any old
note for exchange, it will be returned without
expense to you promptly after the end of the
exchange offer.
United States federal income
tax consequences.............. Your exchange of old notes for new notes in the
exchange offer should not result in any income,
gain or loss to you for federal income tax
purposes. See "Federal Income Tax
Considerations."
Use of proceeds............... We will not receive any proceeds from the
exchange pursuant to the exchange offer.
Exchange agent................ The Chase Manhattan Bank through its offices
specified in this prospectus in New York,
London and Luxembourg is acting as the exchange
agent for the exchange offer. See "The exchange
offer -- exchange agent" and the inside back
cover of this prospectus for the location of
the offices of the exchange agent.
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CONSEQUENCES OF EXCHANGING OLD NOTES IN THE EXCHANGE OFFER
The following summary is based on interpretations by the staff of the SEC
in no action letters issued to third parties. Unless you are an affiliate of
NTL, generally if you exchange your old notes for new notes in the exchange
offer you may offer those new notes for resale, resell those new notes, and
otherwise transfer those new notes without compliance with the registration and
prospectus delivery provisions of the Securities Act. However, those new notes
must have been acquired by you in the ordinary course of your business. In
addition, unless you are a broker-dealer, you must not engage in, intend to
engage in or have any arrangement or understanding with any person to
participate in, a distribution of new notes.
If you do not exchange your old notes for new notes in the exchange offer,
your old notes will continue to be subject to provisions of the indenture under
which they were issued regarding transfer and exchange of the old notes and the
restrictions on transfer contained in the legend on the old notes. See "Risk
Factors -- If you do not exchange your old notes for new notes you will continue
to hold notes subject to restrictions on transfer," "The exchange offer" and
"Registration rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes and the old notes are identical in all material
respects, except for:
(1) the transfer restrictions and registration rights relating to the old
notes, and
(2) provisions under the registration rights agreements providing for
special interest on the old notes under circumstances relating to
timing of the exchange offer, which will terminate on completion of the
exchange offer.
Issuer..................... NTL Communications Corp.
Notes Offered.............. E250.0 million in principal amount of 9 1/4% series
B senior notes due 2006,
E350.0 million in principal amount of 9 7/8% series
B senior notes due 2009, and
E210.0 million in principal amount at maturity of
11 1/2% series B senior deferred coupon notes due
2009.
Maturity................... The 2006 notes mature November 15, 2006.
The 2009 notes mature November 15, 2009.
The deferred coupon notes mature November 15, 2009.
Issue Price................ The issue price for the 2006 notes is 100.000%.
The issue price for the 2009 notes is 100.000%.
The issue price for the deferred coupon notes is
57.333%.
Yield and Interest......... The 2006 notes will accrue interest at a rate of
9 1/4% per year and will be payable in cash,
semi-annually in arrears, on May 15 and November
15, commencing May 15, 2000. The 2009 notes will
accrue interest at a rate of 9 7/8% per
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year and will be payable in cash, semi-annually in
arrears, on May 15 and November 15, commencing May
15, 2000. The deferred coupon notes will accrete at
a rate of 11 1/2% per year to an aggregate
principal amount of E210.0 million by November 15,
2004 and, after November 15, 2004, will pay cash
interest, semi-annually in arrears on May 15 and
November 15, commencing May 15, 2005.
Ranking.................... These notes are senior debts. They rank ahead of
all of our subordinated indebtedness and rank equal
in right of payment with all of our existing and
future senior debts.
Assuming we had completed the offering of the old
notes and applied the proceeds on September 30,
1999, these notes:
- would have ranked equally with approximately $4.4
billion of our senior debts, and
- would have ranked senior in right of payment to
approximately $0.6 billion of our subordinated
indebtedness.
In addition, the notes will effectively rank behind
all existing and future indebtedness and other
liabilities and commitments of our subsidiaries. On
September 30, 1999 the total liabilities of our
subsidiaries were approximately $2.7 billion.
Optional Redemption........ The 2006 notes may not be redeemed by NTL except in
the limited circumstances described in "Description
of the 2006 Notes -- Additional Amounts; Optional
Tax Redemption." On or after November 15, 2004, we
may redeem some or all of the 2009 notes and the
deferred coupon notes at any time at the redemption
prices listed in the "Description of the 2009
Notes" and "Description of the Deferred Coupon
Notes" sections under the heading "Optional
Redemption."
Mandatory Offer to
Repurchase.............. If we experience specific kinds of changes of
control or engage in specific kinds of asset sales,
we must offer to repurchase the notes at the
redemption prices stated in the "Description of the
2006 Notes," "Description of the 2009 Notes" and
"Description of the Deferred Coupon Notes" sections
under the headings "Change of Control" and "Asset
Sale," respectively.
Basic Covenants of
Indentures.............. The indentures will, among other things, restrict
our ability and the ability of some of our
subsidiaries to:
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- make restricted payments,
- incur additional indebtedness and issue preferred
stock,
- incur liens,
- pay dividends on stock or repurchase stock,
- sell all or substantially all of our assets or
merge with or into other companies, and
- engage in certain transactions with affiliates.
These covenants are subject to important
exceptions. For more details, see the "Description
of the 2006 Notes," "Description of the 2009 Notes"
and "Description of the Deferred Coupon Notes"
section under the heading "Covenants."
Original Issue Discount.... The deferred coupon notes are being offered at an
original issue discount for United States federal
income tax purposes. As a result, although cash
interest will not accrue on the deferred coupon
notes prior to November 15, 2004, original issue
discount will accrue from the issue date of the
deferred coupon notes and will be included as
interest income periodically in a holder's gross
income for United States federal income tax
purposes in advance of receipt of the cash payments
to which the income is attributable. See "Federal
Income Tax Considerations."
Governing Law and
Judgments............... The notes and the indentures under which the notes
will be issued will be governed exclusively by the
laws of the State of New York. Under the Judiciary
Law of the State of New York, a judgment or decree
in an action based upon an obligation denominated
in a currency other than U.S. dollars will be made
in the currency of the underlying obligation and
converted into U.S. dollars at the rate of exchange
prevailing on the date of entry of the judgment or
decree.
Trustee, principal paying
agent and registrar..... The Chase Manhattan Bank.
Paying agent and transfer
agent in Luxembourg..... Chase Manhattan Bank Luxembourg S.A.
Listing Agent in
Luxembourg.............. Banque Internationale a Luxembourg.
Book-entry transfer
facilities................. DTC, Euroclear and Cedelbank.
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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information for NTL Communications Corp.
presented below under the captions "Income Statement Data" for the years ended
December 31, 1998, 1997 and 1996, and "Balance Sheet Data" at December 31, 1998,
was derived from our audited consolidated financial statements. Interim data at
September 30, 1999 and for the nine months ended September 30, 1998 and 1999 are
unaudited, but include in the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of that
data. Results for the nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for any other interim period or
for the year as a whole.
In June and September 1998, we purchased ComTel Limited and Telecential
Communications, which we refer to collectively as ComTel, for an aggregate
purchase price of approximately $969.0 million, including intangibles
aggregating approximately $224.0 million. In October 1998, we purchased Comcast
UK Cable Partners Limited, now known as NTL (Triangle) Limited, for an aggregate
purchase price of approximately $600.4 million, including intangibles of
approximately $129.8 million. In December 1998, we purchased Eastern Group
Telecoms or EGT for an aggregate purchase price of approximately $151.0 million,
including intangibles of approximately $45.0 million. In March 1999, we
purchased Diamond Cable Communications plc for an aggregate purchase price of
approximately $986.1 million including intangibles of $1.3 billion. The net
assets and results of operations of ComTel, Comcast UK, EGT and Diamond are
included in the consolidated financial statements from their respective dates of
acquisition. In August 1999, Telewest exercised its right to purchase all of our
shares of Cable London PLC and all of our related rights and interests for a
purchase price of approximately L428.0 million (approximately $704.7 million).
The unaudited pro forma financial information does not give effect to the
proposed acquisition of CWC ConsumerCo by NTL Incorporated or to the proposed
financing of the acquisition.
In May 1996, we purchased NTL Group Limited for an aggregate purchase price
of approximately $439.0 million, including goodwill of approximately $263.0
million. The net assets and results of operations of NTL Group Limited are
included in the consolidated financial statements from the date of the
acquisition.
The unaudited pro forma financial information is derived from the unaudited
pro forma financial data and gives effect to the completed acquisitions and the
sale of Cable London. The unaudited pro forma financial information does not
purport to present our financial position or results of operations had the
acquisitions occurred on the dates specified, nor are they necessarily
indicative of the financial position or results of operations that may be
achieved in the future. The following information should be read
in conjunction with our consolidated financial statements and related notes and
the unaudited pro forma financial data and related notes, in each case,
appearing elsewhere in this prospectus.
9
<PAGE> 14
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------------ ----------------------------------------------
PRO FORMA PRO FORMA
1999 1999 1998 1998 1998 1997 1996
----------- ---------- --------- ---------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................. $ 1,081,658 $1,052,860 $ 484,590 $1,112,984 $ 747,015 $ 491,775 $ 228,343
Costs and expenses
Operating expenses..................... 517,381 507,335 243,476 523,473 372,134 301,644 144,315
Selling, general and administrative
expenses............................. 428,001 416,077 192,070 441,800 299,494 169,133 114,992
Depreciation and amortization.......... 558,377 518,356 156,785 586,044 266,112 150,509 98,653
Franchise fees......................... 22,287 22,287 18,729 25,036 25,036 23,587 13,117
Corporate expenses..................... 18,475 18,475 11,797 21,025 17,048 18,324 14,899
Nonrecurring charges................... -- -- -- (4,194) (4,194) 20,642 --
----------- ---------- --------- ---------- --------- --------- ---------
Total costs and expenses............. 1,544,521 1,482,530 622,857 1,593,184 975,630 683,839 385,976
----------- ---------- --------- ---------- --------- --------- ---------
Operating (loss)....................... (462,863) (429,670) (138,267) (480,200) (228,615) (192,064) (157,633)
Other income (expense)
Interest and other income.............. 37,966 26,829 39,796 83,144 46,024 28,415 33,634
Interest expense....................... (510,131) (484,570) (226,422) (588,402) (328,815) (202,570) (137,032)
Other gains............................ -- -- -- -- -- 21,497 --
Foreign currency transactions
gains/(losses)....................... (18,049) 22,523 (6,973) 24,953 4,152 574 2,408
----------- ---------- --------- ---------- --------- --------- ---------
(Loss) before income taxes, minority
interests and extraordinary item....... (953,077) (864,888) (331,866) (960,505) (507,254) (344,148) (258,623)
Income tax benefit (provision)........... -- -- -- 3,327 3,327 15,591 (7,653)
----------- ---------- --------- ---------- --------- --------- ---------
(Loss) before minority interests and
extraordinary item..................... (953,077) (864,888) (331,866) (957,178) (503,927) (328,557) (266,276)
Minority interests....................... -- -- -- -- -- -- 11,822
(Loss) from early extinguishment of
debt................................... -- -- (4,239) (30,689) (30,689) (4,500) --
----------- ---------- --------- ---------- --------- --------- ---------
Net (loss)............................... $ (953,077) $ (864,888) $(336,105) $ (987,867) $(534,616) $(333,057) $(254,454)
=========== ========== ========= ========== ========= ========= =========
OTHER DATA:
Capital expenditures..................... $ 855,667 $ 464,944 $ 772,144 $ 503,656 $ 505,664
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------------ ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 662,918 $ 996,896
Working capital............................................. 76,648 600,549
Fixed assets, net........................................... 5,229,317 3,854,430
Total assets................................................ 9,368,683 6,194,097
Long-term debt.............................................. 7,482,814 5,043,803
Senior Redeemable Exchangeable Preferred Stock.............. -- 124,127
Shareholder's equity........................................ 875,009 355,154
</TABLE>
10
<PAGE> 15
RISK FACTORS
You should consider carefully all of the information in this prospectus and
incorporated by reference in this prospectus. See "Where you can find more
information about us." In particular, you should carefully evaluate the
following risks before tendering your old notes in the exchange offer. However,
the risk factors set forth below, other than the first risk factor, are also
generally applicable to the old notes as well as the new notes.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES FOR NEW NOTES YOU WILL CONTINUE TO HOLD
NOTES SUBJECT TO RESTRICTIONS ON TRANSFER AND WHICH ARE NOT FREELY TRADEABLE
If you do not tender your old notes or you tender your old notes and we do
not accept the tender, your old notes will continue to be subject to their
existing restrictions on transfer and exchange. In general, unless the old notes
are registered under the Securities Act, you cannot offer or sell your old notes
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Except in limited
circumstances which we summarize under "Registration rights" in this prospectus,
we do not have any obligation to register your old notes under the Securities
Act. We do not expect that we will take any action to register the old notes
under the Securities Act unless we are required to do so in those limited
circumstances.
OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH
We are and, for the foreseeable future will continue to be, highly
leveraged. On September 30, 1999, the accreted value of our total long-term
indebtedness was approximately $7.5 billion.
This debt represents approximately 90% of our total capitalization. The
indentures governing the notes and our other outstanding indebtedness permit us
to incur additional indebtedness to finance our working capital and capital
expenditure requirements, finance the construction of our network and finance
the acquisition of assets, licenses and computer software that are used in
connection with a cable business, as well as entities that are engaged in the
cable business.
Our substantial indebtedness could adversely affect our financial health
by, among other things:
- increasing our vulnerability to adverse changes in general economic
conditions or increases in prevailing interest rates particularly if any
of our borrowings are at variable interest rates;
- limiting our ability to obtain the additional financing we need to
operate, develop and expand our business; and
- requiring us to dedicate a substantial portion of our cash flow from
operations to service our debt, which reduces the funds available for
operations and future business opportunities.
11
<PAGE> 16
IN SOME CIRCUMSTANCES INVOLVING A CHANGE OF CONTROL OF OUR PARENT, WE WILL BE
REQUIRED TO REPURCHASE SOME OF OUR INDEBTEDNESS INCLUDING THE NOTES -- IF THIS
OCCURS, WE MAY NOT HAVE THE FINANCIAL RESOURCES NECESSARY TO MAKE THOSE
REPURCHASES
We may under some circumstances involving a change of control of our parent
be obligated to offer to repurchase outstanding debt securities, including the
notes, before maturity. We cannot assure you that we will have available
financial resources necessary to repurchase those securities in those
circumstances.
THE ANTICIPATED CONSTRUCTION COSTS OF OUR NETWORK WILL INCREASE AS A RESULT OF
OUR RECENT ACQUISITIONS AND WILL REQUIRE SUBSTANTIAL AMOUNTS OF ADDITIONAL
FUNDING
Following our recent acquisitions, our capital expenses and cost of
operations for the development, construction and operation of our combined
telecommunications networks will significantly increase. Given our most recent
acquisitions, we estimate that significant amounts of additional funding will be
necessary to meet these capital expenditure requirements. We estimate that
capital expenditure and debt service requirements, net of cash from operations,
will aggregate up to approximately $1.7 billion in the fourth quarter of 1999
and through December 31, 2000. At September 30, 1999 we had approximately $663.0
million in cash and securities. In addition, NTL Incorporated excluding its
subsidiaries had approximately $889.0 million in cash and securities at
September 30, 1999, most of which is available to fund our cash requirements. As
a result, we will need additional cash to fund our cash requirements.
We cannot be certain that:
- we will be able to obtain additional financing with acceptable terms,
- actual construction costs will meet our expectations,
- we will satisfy conditions precedent to advances under future credit
facilities,
- we will not acquire additional businesses that require additional
capital,
- we will be able to generate sufficient cash from operations to meet
capital requirements, debt service and other obligations when required,
or
- we will withstand exposure to exchange and interest rate fluctuations.
We do not have any firm additional financing plans to address the factors
listed above.
WE WILL REQUIRE ADDITIONAL FINANCING BECAUSE WE DO NOT EXPECT TO GENERATE
SUFFICIENT CASH FLOW TO REPAY AT MATURITY THE ENTIRE PRINCIPAL AMOUNT OF OUR
OUTSTANDING INDEBTEDNESS
We anticipate that we will not generate sufficient cash flow from
operations to repay at maturity the entire principal amount of our outstanding
indebtedness. Some of the measures we may take to refinance our debt include:
- refinancing all or portions of that indebtedness,
- seeking modifications to the terms of that indebtedness, and
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<PAGE> 17
- seeking additional debt financing, which may require us to obtain the
consent of some of our lenders.
We cannot be certain that we will succeed in executing any of these
measures.
TOGETHER WITH NTL INCORPORATED, WE ARE CURRENTLY EVALUATING THE FEASIBILITY AND
DESIRABILITY OF MAKING CWC CONSUMERCO A SUBSIDIARY AT SOME POINT IN THE
FUTURE -- WE CANNOT PREDICT THE OUTCOME OF OUR EVALUATION
As the proposed CWC ConsumerCo acquisition is currently structured, CWC
ConsumerCo will not become a subsidiary of NTL on the closing of the
transaction. Together with NTL Incorporated, we are currently evaluating from an
operating, financial and legal perspective the feasibility and desirability of
making CWC ConsumerCo a subsidiary of NTL in the future. As of the date of this
prospectus, no decision has been made regarding this issue. We cannot currently
predict when we will complete our evaluation or what the result of our
evaluation will be.
If a determination is made to make CWC ConsumerCo a subsidiary of NTL, any
benefits that arise from the acquisition could be less than anticipated. There
is also the risk that the integration of CWC ConsumerCo with NTL and our
networks could be more difficult than anticipated or that there are unknown
liabilities relating to CWC ConsumerCo. We cannot be certain that if CWC
ConsumerCo is subsequently made a subsidiary of ours, we will realize any
expected benefits, the potential risks will not occur or that those risks can be
managed without adversely affecting us.
WE CANNOT BE CERTAIN THAT WE WILL BE SUCCESSFUL IN INTEGRATING ACQUIRED
BUSINESSES INTO OURS, OR THAT WE WILL REALIZE THE BENEFITS WE ANTICIPATE FROM
ANY ACQUISITION
We will continue to consider strategic acquisitions and combinations that
involve operators or owners of licenses to operate cable, telephone, television
or telecommunications systems or services and related businesses. If
consummated, some of these transactions would significantly alter our holdings
and might require us to incur substantial indebtedness. We cannot assure you
that, with respect to our recent acquisitions, as well as future acquisitions,
if they occur, that we:
- will realize any anticipated benefits,
- will successfully integrate the businesses with our operations, or
- will manage that integration without adversely affecting NTL.
WE ARE A HOLDING COMPANY THAT IS DEPENDENT UPON CASH FLOW FROM OUR SUBSIDIARIES
TO MEET OUR OBLIGATIONS -- OUR ABILITY TO ACCESS THAT CASH FLOW MAY BE LIMITED
IN SOME CIRCUMSTANCES
We are a holding company with no independent operations or significant
assets other than our investments in and advances to our subsidiaries and
affiliated joint ventures. We depend upon the receipt of sufficient funds from
our subsidiaries and affiliated joint ventures to meet our obligations. The
terms of existing and future indebtedness of our
13
<PAGE> 18
subsidiaries and the laws of the jurisdictions under which those subsidiaries
are organized may limit the payment of dividends, loans and other distributions
to us.
Your right to receive payments on or in respect of the notes could be
adversely affected in the event of a bankruptcy of any of our subsidiaries.
Following the liquidation of one of our subsidiaries or joint ventures, the
creditors of that subsidiary or joint venture will generally be entitled to be
paid in full before we are entitled to a distribution of any assets in the
liquidation. On September 30, 1999, the total liabilities of our subsidiaries
were approximately $2.7 billion.
WE HAVE HISTORICALLY INCURRED LOSSES AND GENERATED NEGATIVE CASH FLOWS AND
CANNOT ASSURE YOU THAT WE WILL BE PROFITABLE IN THE FUTURE
Construction and operating expenditures have resulted in negative cash
flow, which we expect will continue at least until we establish an adequate
customer base. We also expect to incur substantial additional losses. We cannot
be certain that we will achieve or sustain profitability in the future. Failure
to achieve profitability could diminish our ability to sustain operations and
obtain additional required funds.
We had net losses for:
- the nine months ended September 30, 1999 of $864.9 million,
and for the years ended December 31,
- 1998: $534.6 million
- 1997: $333.1 million
- 1996: $254.5 million
- 1995: $90.8 million
- 1994: $29.6 million
As of September 30, 1999, our accumulated deficit was $2.1 billion.
WE HAVE HISTORICALLY HAD A DEFICIENCY OF EARNINGS TO FIXED CHARGES AND OUR
EARNINGS IN THE FUTURE MAY NOT BE SUFFICIENT TO COVER THOSE FIXED CHARGES
For the nine months ended September 30, 1999 and the years ended December
31, 1998, 1997, 1996, 1995, 1994, our earnings were insufficient to cover fixed
charges by approximately $896.8 million, $565.7 million, $355.4 million, $257.1
million, $105.4 million and $31.8 million, respectively. Fixed charges consist
of interest expense, including capitalized interest, amortization of fees
related to debt financing and rent expense deemed to be interest. Our earnings
in the future may not be sufficient to cover those fixed charges, including our
obligations on the notes.
WE HAVE DISTRIBUTED FUNDS TO NTL INCORPORATED IN THE PAST AND MAY DO SO IN THE
FUTURE
Under our existing indentures and the indentures for these notes we are
permitted to dividend or distribute funds up to specified limits to NTL
Incorporated, our parent. In April
14
<PAGE> 19
1999 we distributed $500.0 million to NTL Incorporated to finance NTL
Incorporated's purchase of the Australian National Transmission Network for
approximately $425.5 million, including related expenses, and its purchase of
the "1G Networks" in France for approximately $67.4 million. NTL Incorporated
may, but is not required to, recontribute those funds to us. Any dividends and
distributions, to the extent permitted, may be made at other times for other
purposes.
ALTHOUGH WE MAY, SUBJECT TO THE LIMITATIONS UNDER OUR INDENTURES, CONTRIBUTE
CASH TO NTL INCORPORATED TO FINANCE ACQUISITIONS, THE CASH FLOW GENERATED FROM
OPERATIONS AT OUR PARENT WILL NOT BE AVAILABLE TO SERVICE OUR OBLIGATIONS UNDER
THE NOTES.
NTL Incorporated will not guarantee the notes. Consequently, any cash flow
generated by the Australian National Transmission Network and the 1G Networks,
which have been recently acquired by NTL Incorporated, as well as any other
assets located at, or acquired by, NTL Incorporated, will not be available to
service our obligations under the notes unless contributed or otherwise
distributed to us. Furthermore, the acquisition of CWC ConsumerCo will initially
be made at the parent company level and any cash flow generated from CWC
ConsumerCo once acquired will not be available to service our obligations under
the notes unless CWC ConsumerCo is subsequently contributed or otherwise
distributed to us.
WE ARE SUBJECT TO SIGNIFICANT COMPETITION, WHICH WE EXPECT TO INTENSIFY, IN EACH
OF OUR BUSINESS AREAS -- IF WE ARE UNABLE TO COMPETE SUCCESSFULLY OUR FINANCIAL
HEALTH COULD BE ADVERSELY AFFECTED
We face significant competition from established and new competitors in
each of our businesses. As existing technology develops and new technologies
emerge, we believe that competition will intensify in each of our business
areas, particularly business telecommunications and the internet. Some of our
competitors have substantially greater financial and technical resources than we
do. If we are unable to compete successfully our business, financial condition
and results of operations could be adversely affected.
OUR PRINCIPAL BUSINESSES ARE SUBJECT TO GOVERNMENT REGULATION, INCLUDING PRICING
REGULATION, WHICH MAY CHANGE ADVERSELY TO US
Our principal business activities in the UK are regulated and supervised by
various governmental bodies. Changes in laws, regulations or governmental policy
or the interpretations of those laws or regulations affecting our activities and
those of our competitors, such as licensing requirements, changes in price
regulation and deregulation of interconnection arrangements, could have a
material adverse effect on us.
In addition, we are also subject to regulatory initiatives of the European
Commission. Changes in EU Directives may reduce the range of programing and
increase the costs of purchasing television programming or require us to provide
access to our cable network infrastructure to other service providers, which
could have a material adverse effect on us.
15
<PAGE> 20
OUR BROADCAST SERVICES BUSINESS IS DEPENDENT UPON SITE SHARING ARRANGEMENTS WITH
OUR PRINCIPAL COMPETITOR
As a result of, among other factors, a natural shortage of potential
transmission sites and the difficulties in obtaining planning permission for
erection of further masts, the Castle Tower Corporation Consortium and NTL have
made arrangements to share a large number of tower sites. We cannot assure you
that the site sharing arrangements will not be terminated. Termination of the
site sharing arrangements would have a material adverse effect on us.
Under the present arrangements, one of the parties is the owner, lessor or
licensor of each site and the other party is entitled to request a license to
use specified facilities at that site. Each site license granted pursuant to the
site sharing agreement is for an initial period expiring on December 31, 2005,
subject to title to the site and to the continuation in force of the site
sharing agreement. Each site sharing agreement provides that, if requested by
the sharing party, it will be extended for further periods. Either party may
terminate the agreement by 5 years' notice in writing to the other expiring on
December 31, 2005 or at any date which is a date 10 years or a multiple of 10
years after December 31, 2005.
OUR BROADCAST SERVICES BUSINESS IS DEPENDENT UPON ITV AND OTHER CONTRACTS
Our broadcast services business is substantially dependent upon contracts
with the ITV contractors, Channel 4/Welsh Fourth Channel and Vodafone for the
provision of transmission services. The prices that we may charge these
companies for transmission services are subject to regulation by OFTEL. The
contracts with the ITV contractors and Channel 4/Welsh Fourth Channel terminate
on December 31, 2002. Although, historically, the ITV contractors and Channel
4/Welsh Fourth Channel have renewed their contracts with us, we cannot assure
you that they will do so upon expiration of the current contracts, that they
will not negotiate terms for provision of transmission services by us on a basis
less favorable to us or that they would not seek to obtain from third parties a
portion of the transmission services currently provided by us. The loss of any
one of these contracts could have a material adverse effect on us.
OUR COMPUTER SYSTEMS AND SOFTWARE AND THE COMPUTER SYSTEMS AND SOFTWARE OF
THE THIRD PARTIES UPON WHOM WE RELY MAY MALFUNCTION AND INTERRUPT OUR OPERATIONS
AND SERVICES AND HARM OUR BUSINESS AS A RESULT OF THE YEAR 2000 PROBLEM.
Our operations are heavily dependent on computer systems and software and
other electronic devices. Many existing computer programs and electronic devices
mistakenly treat dates falling after December 31, 1999 because they only use two
digits to identify a year in the date field. Year 2000 problems may affect us in
connection with the computer systems, software and other electronic devices we
use in our operations as well as the computer systems, software and other
electronic devices which our suppliers, customers and strategic partners operate
or upon which they rely.
We have conducted a program to identify and remedy any Year 2000 issues
with our computer systems, software and other electronic devices. To date, we
have not experienced
16
<PAGE> 21
any significant problems related to the Year 2000. However, a problem that has
not yet been identified may arise and could have adverse consequences to us.
FAILURE TO MANAGE OUR GROWTH AND EXPANSION COULD HAVE A MATERIAL ADVERSE EFFECT
ON US
We have experienced rapid growth and development in a relatively short
period, and to meet our strategic objectives will require a continuation of that
growth. Management of that growth will require, among other things:
- stringent control of construction and other costs,
- continued development of our financial and management controls,
- increased marketing activities, and
- the training of new personnel.
Failure to manage our rapid growth and development successfully could have
a material adverse effect on us.
WE ARE DEPENDENT UPON A SMALL NUMBER OF KEY PERSONNEL
A small number of key executive officers manage our businesses, and the
loss of one or more of these executive officers could have a material adverse
effect on us. We believe that our future success will depend in large part on
our continued ability to attract and retain highly skilled and qualified
personnel. We have not entered into written employment contracts or non-compete
agreements with, nor have we obtained life insurance policies covering those key
executive officers. Some of our senior managers also serve as members of senior
management of other companies in the telecommunications business.
THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGES AND WE
CANNOT PREDICT THE EFFECT OF ANY CHANGES ON OUR BUSINESSES
The telecommunications industry is subject to rapid and significant changes
in technology and the effect of technological changes on our businesses cannot
be predicted. However, the cost of implementation for emerging and future
technologies could be significant, and our ability to fund such implementation
may depend on our ability to obtain additional financing.
WE ARE SUBJECT TO CURRENCY RISK BECAUSE WE OBTAIN A SUBSTANTIAL AMOUNT OF
FINANCING IN U.S. DOLLARS BUT GENERALLY GENERATE REVENUES AND INCUR EXPENSES IN
OTHER CURRENCIES
We will encounter currency exchange rate risks because we generate revenues
and incur construction and operating expenses in other currencies, primarily in
British pounds sterling, while we pay interest and principal obligations with
respect to most of our existing indebtedness in United States dollars. We cannot
assure you that any hedging transaction we might enter into will be successful
and that shifts in the currency exchange rates will not have a material adverse
effect on us.
17
<PAGE> 22
WE DO NOT INSURE THE UNDERGROUND PORTION OF OUR NETWORK
We obtain insurance of the type and in the amounts that we believe are
customary in the UK for similar companies. Consistent with this practice, we do
not insure the underground portion of our cable network. Substantially all of
our cable network is constructed underground. Any catastrophe that affects a
significant portion of a system's underground cable network could result in
substantial uninsured losses.
THERE HAS BEEN NO PUBLIC MARKET FOR THE NOTES -- WE CANNOT ASSURE YOU THAT A
LIQUID MARKET WILL DEVELOP FOR THE NOTES
There has been no public market for the notes. We do not intend to seek to
have any of the notes listed or quoted on any securities exchange or automated
quotation system, except for the Luxembourg Stock Exchange. Although the initial
purchasers of the old notes have advised us that they currently intend to make a
market in the notes, they are not obligated to do so and any market making may
be discontinued at any time without notice. As a result, we cannot assure you as
to the ongoing development or liquidity of any market that may develop for the
notes.
YOU SHOULD BE AWARE THAT ACTUAL RESULTS MAY TURN OUT TO BE MATERIALLY DIFFERENT
FROM ANY FORWARD-LOOKING STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS
This prospectus includes or incorporates by reference projections of
broadcast transmission revenues, build-out results and other forward-looking
statements, including those using words such as "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions. In reviewing information
included or incorporated by reference in this prospectus, it should be kept in
mind that actual results may differ materially from those expressed or implied
in those projections and forward-looking statements. Important assumptions and
factors that could cause actual results to differ materially from those
contemplated or projected, forecast, estimated or budgeted in or expressed or
implied by those projections and forward-looking statements include those
specified in this Risk Factors section, as well as:
- industry trends,
- our ability to
-- continue to design network routes and install facilities,
-- obtain and maintain any required government licenses or
approvals, and
-- finance construction and development,
all in a timely manner, at reasonable costs and on satisfactory terms and
conditions,
- assumptions about
-- customer acceptance,
-- churn rates,
-- overall market penetration and competition from providers of
alternative services,
18
<PAGE> 23
-- Year 2000 readiness, and
-- availability, terms and deployment of capital.
We assume no obligation to update projections or other forward-looking
statements to reflect actual funding requirements, capital expenditures and
results, changes in assumptions or in the factors affecting these projections or
other forward-looking statements. We cannot assure you that:
- any financings will be obtained when required, on acceptable terms or at
all,
- actual amounts required to complete our planned build out will not exceed
the amount we estimate (see "-- The anticipated construction costs of our
network will increase as a result of our recent acquisitions and will
require substantial amounts of additional funding") or that additional
financing substantially in excess of that amount will not be required,
- we will not acquire franchises, licenses or other new businesses that
would require additional capital,
- operating cash flow will meet expectations or that we will be able to
access such cash from our subsidiaries' operations to meet any unfunded
portion of our capital requirements when required or to satisfy the terms
of the notes, or our other debt instruments and agreements for the
incurrence of additional debt financing (see "-- We are a holding company
that is dependent upon cash flow from our subsidiaries to meet our
obligations -- our ability to access that cash flow may be limited in
some circumstances"),
- we will not incur losses from their exposure to exchange rate
fluctuations or be adversely affected by interest rate fluctuations (see
"-- We are subject to currency risk because we obtain a substantial
amount of financing in U.S. dollars but generally generate revenues and
incur expenses in other currencies"),
- there will not be adverse changes in applicable United States, United
Kingdom or Bermuda tax laws, or
- the future effects of monetary union in Europe will not be materially
adverse to us.
All forward-looking statements included or incorporated by reference in this
prospectus are expressly qualified by those considerations.
19
<PAGE> 24
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
This prospectus and the accompanying letter of transmittal set out the
terms and conditions of the exchange offer. On and subject to those terms and
conditions we will accept for exchange old notes which are properly tendered on
or before the expiration date and not withdrawn as permitted below. The
expiration date is 5:00 p.m., New York City time, on , 2000.
However, if we, in our sole discretion, extend the period of time for which the
exchange offer is open, the expiration date will be the latest time and date to
which we extend the exchange offer.
This prospectus, together with the letter of transmittal, is first being
sent on or about the date of this prospectus, to all holders of old notes known
to us. Our obligation to accept old notes for exchange under the exchange offer
is subject to the conditions described under "Conditions to the exchange offer"
below.
We expressly reserve the right, at any time or on one or more occasions, to
extend the period of time during which the exchange offer is open, and delay
acceptance for exchange of any old notes, by giving oral or written notice of
the extension to you. During any extension of the exchange offer, all old notes
previously tendered will remain subject to the exchange offer and may be
accepted for exchange by us. If we do not accept any old notes tendered for
exchange for any reason they will be returned to you. We will return those notes
without expense to you as promptly as practicable after the end of the exchange
offer.
Old notes tendered in the exchange offer must be in denominations of
principal amount at maturity of E1,000 and any whole multiple of E1,000.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any old notes which we have not already accepted
for exchange, if any of the conditions of the exchange offer specified below
under "Conditions to the exchange offer" occur. We will give oral or written
notice of any extension, amendment, non-acceptance or termination to you as
promptly as practicable. A notice in the case of any extension will be issued by
means of a press release or other public announcement no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date.
The tender to us of old notes by you and the acceptance by us of your
tender will be a binding agreement between us on the terms and subject to the
conditions described in this prospectus and in the accompanying letter of
transmittal in respect of the old notes tendered by you.
PROCEDURES FOR TENDERING OLD NOTES
When we refer to a holder of old notes in this section of the prospectus
relating to the exchange offer, that includes account holders and any
participant in the DTC, Euroclear or Cedelbank clearing systems whose name
appears on a security position listing as the holder of those old notes. Any
holder who wishes to tender old notes for exchange in the
20
<PAGE> 25
exchange offer must transmit the letter of transmittal, properly completed and
duly executed, including all other documents required by the letter of
transmittal or, in the case of a book-entry transfer, an agent's message instead
of a letter of transmittal to The Chase Manhattan Bank as exchange agent at one
of the addresses set forth below under "Exchange agent," on or before the
expiration date.
In addition, either
- certificates for the tendered old notes must be received by the exchange
agent along with the letter of transmittal before the expiration date,
- a timely confirmation of a book-entry transfer of the tendered old notes,
which we refer to as a book-entry confirmation, into the appropriate
exchange agent's account at the appropriate book-entry transfer facility
pursuant to the procedure for book-entry transfer described below, must
be received by the exchange agent before the expiration date along with
the letter of transmittal or an agent's message instead of a letter of
transmittal, or
- the holder must comply with the guaranteed delivery procedures we
describe below.
An agent's message means a message, transmitted by the book-entry transfer
facility to and received by the exchange agent. An agent's message forms a part
of a book-entry confirmation, which states that the book-entry transfer facility
has received an express acknowledgment from the tendering participant stating
that the participant has received and agrees to be bound by, and makes the
representations and warranties contained in, the appropriate letter of
transmittal and that we may enforce such letter of transmittal against the
participant.
The method of delivery of old notes, letters of transmittal and all other
required documents is at your election and risk. If delivery is by mail, we
recommend that you use registered mail, properly insured, with return receipt
requested. In all cases, you should allow sufficient time to assure delivery
before the expiration date. No letters of transmittal or old notes should be
sent to NTL.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless
- you have not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the letter of transmittal, or
- the old notes are tendered for the account of an eligible institution, as
we define that term below.
In the event that a signature on a letter of transmittal or a notice of
withdrawal is required to be guaranteed, the guarantee must be by a firm which
is
- a member of a registered national securities exchange,
- a member of the National Association of Securities Dealers, Inc.,
21
<PAGE> 26
- a commercial bank or trust company having an office or correspondent in
the United States, or
- another eligible institution within the meaning of Rule 17(A)(d)-15 of
the Exchange Act.
We refer to each of the institutions in the bullet points above as eligible
institutions. If old notes are registered in the name of a person other than a
signer of the letter of transmittal, the old notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer, or exchange, in satisfactory form as determined by us in our sole
discretion, duly executed by the registered holder with the signature on those
documents guaranteed by an eligible institution.
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of old notes tendered for exchange will be determined by
us in our sole discretion. Our determination shall be final and binding. We
reserve the absolute right to reject any and all tenders of any particular old
note not properly tendered or to not accept any particular old note which
acceptance might, in our judgment or the judgment of our counsel, be unlawful.
We also reserve the absolute right to waive any defects or irregularities or
conditions of the exchange offer as to any particular old note either before or
after the expiration date, including the right to waive the ineligibility of any
holder who seeks to tender old notes in the exchange offer.
The interpretation by us of the terms and conditions of the exchange offer
as to any particular old note either before or after the expiration date,
including the appropriate letter of transmittal and the instructions to the
letter of transmittal shall be final and binding on all parties. Any defects or
irregularities in connection with tenders of old notes for exchange must be
cured within reasonable period of time determined by us unless we waive those
defects or irregularities. Neither we, the exchange agent nor any other person
shall be under any duty to give you notification of any defect or irregularity
with respect to any tender of old notes by you for exchange, nor shall any of
them incur any liability for failure to give such notification.
If a letter of transmittal is signed by a person or persons other than the
registered holder or holders of old notes, the old notes must be endorsed or
accompanied by appropriate powers of attorney. The old notes or the power of
attorney should be signed exactly as the name or names of the registered holder
or holders that appear on the security position listing.
If a letter of transmittal, any old notes or powers of attorney are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, the
person signing should so indicate when signing and, in addition, proper evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal, unless we waive it.
By tendering, you will represent to us that, among other things,
22
<PAGE> 27
- the new notes acquired in the exchange offer are being obtained in the
ordinary course of business of the person receiving the new notes,
whether or not that person is the holder,
- that neither the holder nor any other person receiving the new notes has
an arrangement or understanding with any person to participate in the
distribution of the notes, and
- that neither the holder nor any other person receiving the new notes is
an affiliate, as defined under Rule 405 of the Securities Act, of NTL.
If you are an affiliate of ours, are engaged in or intend to engage in or
have any arrangement with any person to participate in the distribution of the
new notes to be acquired pursuant to the exchange offer, you
- cannot rely on the applicable interpretations of the staff of the SEC,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
If you are a broker-dealer who holds old notes acquired for your own
account as a result of market-making activities or other trading activities, and
you receive new notes in exchange for those old notes in the exchange offer, you
may be an "underwriter" within the meaning of the Securities Act and must
acknowledge that you will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the new notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, you
will not be deemed to admit that you are an "underwriter" within the meaning of
the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will
- accept, promptly after the expiration date, all old notes properly
tendered,
- issue the new notes promptly after acceptance of the old notes, and
- cause the new notes to be authenticated by the trustee.
For purposes of the exchange offer, we shall be deemed to have accepted
properly tendered old notes for exchange when, as and if we have given oral,
promptly confirmed in writing, or written notice of that acceptance to the
exchange agent. For each old note accepted for exchange, the holder of such old
note will receive a new note of the same class having a principal amount at
maturity equal to that of the surrendered old note.
If any old notes tendered by you are not accepted for any reason set forth
in the terms and conditions of the exchange offer or if you submitted old notes
for an amount or quantity greater than you desire to exchange, those unaccepted
or non-exchanged old notes will be returned without expense to you. In the case
of old notes tendered by book-entry transfer into the exchange agent's account
at the book-entry transfer facility pursuant to the book-entry procedures
described below, those non-exchanged old notes will be credited to
23
<PAGE> 28
an account maintained with the book-entry transfer facility as promptly as
practicable after the end of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will seek to establish accounts with respect to the old
notes at each book-entry transfer facility for purposes of the exchange offer
within two business days after the date of this prospectus unless the exchange
agent already has established an account with the book-entry transfer facility
suitable for the exchange offer. If you are a financial institution that is a
participant in a book-entry transfer facility's system you may make book-entry
delivery of old notes by causing the book-entry transfer facility to transfer
such old notes into the exchange agent's account at the book-entry transfer
facility in accordance with the book-entry transfer facility's procedures for
transfer.
Although you may deliver old notes to the exchange agent in the exchange
offer through book-entry transfer at the book-entry transfer facility, the
letter of transmittal or a facsimile of it, with any required signature
guarantees or an agent's message instead and any other required documents, must
be transmitted to and received by the exchange agent at one of the addresses set
forth below under "Exchange agent," on or before the expiration date. If this is
not possible, the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If you want to tender old notes and your old notes are not immediately
available, or time will not permit your old notes or other required documents to
reach the exchange agent before the expiration date, or you cannot complete the
procedure for book-entry transfer on a timely basis, you may tender your old
notes if
- the tender is made through an eligible institution,
- before the expiration date, the exchange agent received from the
eligible institution the appropriate notice of guaranteed delivery,
substantially in the form provided by us, by telegram, telex,
facsimile transmission, mail or hand delivery, setting forth your
name and address and the amount of old notes tendered, stating that
the tender is being made by that notice. The notice of guaranteed
delivery must guarantee that within five New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery, the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation, as the case
may be, together with a properly completed and duly executed letter
of transmittal, or facsimile of the letter of transmittal or agent's
message instead, with any required signature guarantees, and any
other documents required by the appropriate letter of transmittal
will be deposited by the eligible institution with the exchange
agent, and
- the certificates for all physically tendered old notes, in proper
form for transfer, or a book-entry confirmation, as the case may be,
together with a properly
24
<PAGE> 29
completed and duly executed appropriate letter of transmittal, or
facsimile of the letter of transmittal or agent's message instead,
with any required signature guarantees, and all other documents
required by the letter of transmittal, are received by the exchange
agent within five New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of old notes at any time before the expiration
date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at the addresses set forth below under "Exchange
agent". Any notice of withdrawal must:
- specify the name of the person having tendered the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the principal amount at
maturity,
- and where certificates for old notes have been transmitted, specify the
name in which those old notes are registered, if different from that of
the withdrawing holder.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent then, before the release of such certificates you must
also submit the serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless you are an eligible institution. If you tendered old notes
under the procedure for book-entry transfer described above, the executed notice
of withdrawal, guaranteed by an eligible institution, unless you are an eligible
institution, must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn old notes and otherwise
comply with the procedures of that facility. All questions as to the validity,
form and eligibility, including time of receipt, of notices of withdrawal will
be determined by us. Our determination will be final and binding on all parties.
Any old notes withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer. Any old notes which you tender for
exchange but which are not exchanged for any reason will be returned to you
without cost to you or, in the case of old notes tendered by book-entry transfer
into the exchange agent's account at the book-entry transfer facility pursuant
to the book-entry transfer procedures described above, such old notes will be
credited to an account maintained with the book-entry transfer facility for the
old notes as soon as practicable after withdrawal. Properly withdrawn old notes
may be retendered by following one of the procedures described under
"-- Procedures for tendering old notes" above at any time on or before the
expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we will not be
required to accept for exchange, or to issue new notes in exchange for, the old
notes and may terminate or amend the exchange offer if at any time before the
acceptance of the old notes
25
<PAGE> 30
for exchange or the exchange of the new notes for the old notes any of the
following events occurs:
(1) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have
been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission,
(a) seeking to restrain or prohibit the making or consummation of
the exchange offer or any other transaction contemplated by
the exchange offer, or assessing or seeking any damages as a
result of the exchange offer or any transaction contemplated
by the exchange offer, or
(b) resulting in a material delay in our ability to accept for
exchange or exchange some or all of the old notes in the
exchange offer,
or any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed
applicable to the exchange offer or any of the transactions
contemplated by the exchange offer by any government or
governmental authority, domestic or foreign, or any action shall
have been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign, that
in our sole judgment might directly or indirectly result in any of
the consequences referred to in clauses (a) or (b) above or, in our
sole judgement, might result in the holders of new notes having
obligations with respect to resales and transfers of new notes
which are greater than those described in the interpretation of the
Commission referred to in this prospectus, or would otherwise make
it inadvisable to proceed with the exchange offer; or
(2) there shall have occurred
(a) any general suspension of or general limitation on prices for,
or trading in, securities on any national securities exchange
or in the over-the-counter market,
(b) any limitation by any governmental agency or authority which
may adversely affect the ability of NTL to complete the
transactions contemplated by the exchange offer,
(c) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by any governmental agency or authority which
adversely affects the extension of credit or
(3) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the
time of the commencement of the exchange offer, a material
acceleration or worsening of those circumstances; or
26
<PAGE> 31
(4) any change or any development involving a prospective change shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations
or prospects of NTL and our subsidiaries taken as a whole that, in
our reasonable judgment, is or may be adverse to us, or we shall
have become aware of facts that, in our reasonable judgment, have
or may have adverse significance with respect to the value of the
old notes or the new notes;
which, in our reasonable judgment in any case, and regardless of
the circumstances, including any action by us, giving rise to that
condition, makes it inadvisable to proceed with the exchange offer
and/or with such acceptance or exchange or with that exchange.
The conditions described above are for our sole benefit. Those conditions
may be asserted by us regardless of the circumstances giving rise to that
condition or may be waived by us in whole or in part at any time and from time
to time in our sole discretion. The failure by us at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any of our rights and each
of our rights shall be deemed an ongoing right which may be asserted at any time
and from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for any such old notes, if at such time any
stop order shall be threatened or in effect with respect to the registration
statement of which this prospectus constitutes a part or the qualification of
the indentures under the Trust Indenture Act of 1939.
27
<PAGE> 32
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as the exchange agent in
respect of the notes for the exchange offer. All executed letters of transmittal
should be sent to the exchange agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal in respect of the notes and requests
for notices of guaranteed delivery should be directed to the exchange agent
addressed as follows:
Delivery To: The Chase Manhattan Bank, as exchange agent
<TABLE>
<S> <C>
In London
By Mail, By Hand and Overnight Courier: By Facsimile:
The Chase Manhattan Bank 44 171 777 5410
Attn: Operations Manager
Trinity Tower Confirm by Telephone:
9 Thomas More Street Operations Manager: 44 171 777 5414
London E1 9YT
In Luxembourg
By Mail, By Hand and Overnight Courier: By Facsimile:
Chase Manhattan Bank Luxembourg S.A. (352) 46 26 85 380
Attn: Operations Manager
5 Rue Plaetis Confirm by Telephone:
L-2338, Luxembourg Operations Manager: (352) 46 26 85236
In New York
By Mail, By Hand and Overnight Courier: By Facsimile:
The Chase Manhattan Bank (212) 638-7380
Corporate Trust -- Securities Window (212) 638-7381
Room 234 -- North Building
55 Water Street Confirm by Telephone
New York, New York 10041 Carlos Esteves: (212) 638-0828
(212) 638-0454
</TABLE>
Delivery of the letter of transmittal in respect of the notes to an address
other than as set forth above or transmission via facsimile other than as set
forth above is not a valid delivery of the letter of transmittal.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer except for reimbursement of mailing expenses.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by us and are estimated in the aggregate to be $250,000.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with any
tender of old notes for exchange, except if you instruct us to register new
notes in the name of, or
28
<PAGE> 33
request that old notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering holder, you will be
responsible for the payment of any applicable transfer tax thereon.
29
<PAGE> 34
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange of the old notes
for new notes. We used the aggregate net proceeds of the offering of the old
notes to repay in full the bridge facility we entered into to finance the
Cablelink acquisition. At September 30, 1999, the Cablelink bridge facility bore
interest at the rate of 11.25%. The proceeds remaining after such repayment will
be used for the purposes permitted by our indentures. The remaining proceeds
amounted to approximately $4,238,000.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the noon buying
rate for pounds sterling expressed in U.S. dollars per L1.00.
The average rate is the average of the noon buying rates on the last day of
each month during the relevant period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD END AVERAGE HIGH LOW
- ----------------------- ---------- ---------- ----- -----
<S> <C> <C> <C> <C>
1994.......................................... 1.57 1.53 1.64 1.46
1995.......................................... 1.55 1.58 1.64 1.53
1996.......................................... 1.71 1.56 1.72 1.49
1997.......................................... 1.65 1.64 1.71 1.56
1998.......................................... 1.66 1.66 1.72 1.61
1999.......................................... 1.62 1.61 1.65 1.58
</TABLE>
Before January 1, 1999, the pound sterling was a part of the European
Monetary System exchange rate mechanism known as the EMS. Within the EMS,
exchange rates fluctuated within permitted margins, fixed by central bank
intervention. In accordance with the provisions of the Treaty on European Union
negotiated at Maastricht in 1991 and signed by the then 12 member states of the
European Union in early 1992, a European Monetary Union, known as the EMU,
superseded the EMS on January 1, 1999 and the euro was introduced as the single
European currency. Since that date, the euro has been the lawful currency of the
EMU states. The following 11 member states participate in the EMU and have
adopted the euro as their national currency: Austria, Belgium, Finland, France,
Germany, the Republic of Ireland, Italy, Luxembourg, The Netherlands, Portugal
and Spain.
30
<PAGE> 35
CAPITALIZATION
The following table sets forth the consolidated capitalization of NTL
Communications Corp. as of September 30, 1999, and is adjusted to give effect to
the offering of the old notes and the application of the net proceeds from the
sale of the old notes. All amounts have been translated into U.S. dollars at
September 30, 1999 exchange rates.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------
ACTUAL AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and marketable securities............ $ 662,918 $ 694,812
============ ============
Current portion of long-term debt........................... $ 114,976 $ 114,976
============ ============
Long-term debt:
NTL Communications:
Senior Increasing Rate Notes........................... $ 704,615 $ --
12 3/4% Series A Senior Deferred Coupon Notes due
2005................................................. 259,866 259,866
11 1/2% Series B Senior Deferred Coupon Notes due
2006................................................. 904,878 904,878
9 1/4% Senior Notes due 2006........................... -- 267,100
10% Series B Senior Notes due 2007..................... 400,000 400,000
9 1/2% Senior Sterling Notes due 2008.................. 205,208 205,208
10 3/4% Senior Deferred Coupon Sterling Notes due
2008................................................. 340,929 340,929
9 3/4% Senior Deferred Coupon Notes due 2008........... 930,037 930,037
11 1/2% Senior Notes due 2008.......................... 625,000 625,000
12 3/8% Senior Deferred Coupon Notes due 2008.......... 278,356 278,356
7% Convertible Subordinated Notes due 2008............. 599,300 599,300
9 3/4% Senior Deferred Coupon Sterling Notes due
2009................................................. 352,540 352,540
9 7/8% Senior Notes due 2009........................... -- 373,940
11 1/2% Senior Deferred Coupon Notes due 2009.......... -- 128,635
NTL Triangle:
11.2% Senior Discount Debentures due 2007.............. 457,758 457,758
Other.................................................. 7,135 7,135
Diamond:
13 1/4% Senior Discount Notes due 2004................. 285,223 285,223
11 3/4% Senior Discount Notes due 2005................. 462,905 462,905
10 3/4% Senior Discount Notes due 2007................. 328,165 328,165
10% Senior Sterling Notes due 2008..................... 222,264 222,264
9 1/8% Senior Notes due 2008........................... 110,000 110,000
Other.................................................. 8,635 8,635
------------ ------------
Total long-term debt.............................. 7,482,814 7,547,874
------------ ------------
</TABLE>
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<PAGE> 36
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------
ACTUAL AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Common stock, $0.01 par value, 100 shares authorized, issued
and outstanding............................................. -- --
Additional paid-in capital................................ 2,894,190 2,894,190
Accumulated other comprehensive income.................... 97,375 97,375
(Deficit)................................................. (2,116,556) (2,119,590)
------------ ------------
Total shareholders' equity........................ 875,009 871,975
------------ ------------
Total capitalization........................................ $ 8,357,823 $ 8,419,849
============ ============
</TABLE>
- ---------------
There has been no material change to the capitalization of NTL since September
30, 1999.
32
<PAGE> 37
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information for NTL Communications
Corp. presented below under the captions "Income Statement Data". For the years
ended December 31, 1998, 1997, 1996, 1995 and 1994, and "Balance Sheet Data" at
December 31, 1998, was derived from our consolidated financial statements
audited by Ernst & Young LLP. Interim data at September 30, 1999, and for the
nine months ended September 30, 1998 and 1999 are unaudited, but include in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of that data. Results for the
nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for any other interim period or for the year as a
whole.
In June and September 1998, we purchased ComTel and Telecential
Communications, which we refer to collectively as ComTel, for an aggregate
purchase price of approximately $969.0 million, including intangibles
aggregating approximately $224.0 million. In October 1998, we purchased Comcast
UK Cable Partners Limited, now known as NTL (Triangle) Limited, for an aggregate
purchase price of approximately $600.4 million, including intangibles of
approximately $129.8 million. In December 1998, we purchased EGT for an
aggregate purchase price of approximately $151.0 million, including intangibles
of approximately $45.0 million. In March 1999, we purchased Diamond for an
aggregate purchase price of $986.1 million including intangibles of $1.3
billion. The net assets and results of operations of ComTel, Comcast UK, EGT and
Diamond are included in the consolidated financial statements from their
respective dates of acquisition. In August 1999, Telewest exercised its right to
purchase all of our shares of Cable London PLC and all of our related rights and
interests for a purchase price of approximately L428.0 million (approximately
$704.7 million). The unaudited pro forma financial information does not give
effect to the proposed acquisition of CWC ConsumerCo by NTL Incorporated or to
the proposed financing of the acquisition.
In May 1996, we purchased NTL Group Limited for an aggregate purchase price
of approximately $439.0 million, including goodwill of approximately $263.0
million. The net assets and results of operations of NTL Group Limited are
included in the consolidated financial statements from the date of the
acquisition.
The unaudited pro forma financial information is derived from the unaudited
pro forma financial data and give effect to the completed acquisitions and the
sale of Cable London. The unaudited pro forma financial information does not
purport to present our financial position or results of operations had the
acquisitions occurred on the dates specified, nor are they necessarily
indicative of the financial position or results of operations that may be
achieved in the future. The following information should be read in conjunction
with our consolidated financial statements and related notes and the unaudited
pro forma financial data and related notes, in each case, appearing elsewhere in
this prospectus.
33
<PAGE> 38
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------------------- -----------------------------------
PRO FORMA PRO FORMA
1999 1999 1998 1998 1998 1997
----------- ----------- ---------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $ 1,081,658 $ 1,052,860 $ 484,590 $ 1,112,984 $ 747,015 $ 491,775
Costs and expenses
Operating expenses.................. 517,381 507,335 243,476 523,473 372,134 301,644
Selling, general and administrative
expenses.......................... 428,001 416,077 192,070 441,800 299,494 169,133
Depreciation and amortization....... 558,377 518,356 156,785 586,044 266,112 150,509
Franchise fees...................... 22,287 22,287 18,729 25,036 25,036 23,587
Corporate expenses.................. 18,475 18,475 11,797 21,025 17,048 18,324
Nonrecurring charges................ -- -- -- (4,194) (4,194) 20,642
----------- ----------- ---------- ----------- --------- ---------
Total costs and expenses.......... 1,544,521 1,482,530 622,857 1,593,184 975,630 683,839
----------- ----------- ---------- ----------- --------- ---------
Operating income (loss)............. (462,863) (429,670) (138,267) (480,200) (228,615) (192,064)
Other income (expense)
Interest and other income........... 37,966 26,829 39,796 83,144 46,024 28,415
Interest expense.................... (510,131) (484,570) (226,422) (588,402) (328,815) (202,570)
Other gains......................... -- -- -- -- -- 21,497
Foreign currency transactions
gains/(losses).................... (18,049) 22,523 (6,973) 24,953 4,152 574
----------- ----------- ---------- ----------- --------- ---------
(Loss) before income taxes, minority
interests and extraordinary item.... (953,077) (864,888) (331,866) (960,505) (507,254) (344,148)
Income tax benefit (provision)........ -- -- -- 3,327 3,327 15,591
----------- ----------- ---------- ----------- --------- ---------
(Loss) before minority interests and
extraordinary item.................. (953,077) (864,888) (331,866) (957,178) (503,927) (328,557)
Minority interests.................... -- -- -- -- -- --
(Loss) from early extinguishment of
debt................................ -- -- (4,239) (30,689) (30,689) (4,500)
----------- ----------- ---------- ----------- --------- ---------
Net (loss)............................ $ (953,077) $ (864,888) $ (336,105) $ (987,867) $(534,616) $(333,057)
=========== =========== ========== =========== ========= =========
OTHER DATA:
Capital expenditures.................. $ 855,667 $ 464,944 $ 772,144 $ 503,656
Ratio of earnings to fixed
charges(1).......................... -- -- -- -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $ 228,343 $ 33,741 $ 13,745
Costs and expenses
Operating expenses.................. 144,315 24,415 7,827
Selling, general and administrative
expenses.......................... 114,992 57,932 19,468
Depreciation and amortization....... 98,653 29,823 17,916
Franchise fees...................... 13,117 -- --
Corporate expenses.................. 14,899 14,697 8,422
Nonrecurring charges................ -- -- --
--------- -------- --------
Total costs and expenses.......... 385,976 126,867 53,633
--------- -------- --------
Operating income (loss)............. (157,633) (93,126) (39,888)
Other income (expense)
Interest and other income........... 33,634 21,185 18,403
Interest expense.................... (137,032) (28,379) (11,410)
Other gains......................... -- -- --
Foreign currency transactions
gains/(losses).................... 2,408 84 2,062
--------- -------- --------
(Loss) before income taxes, minority
interests and extraordinary item.... (258,623) (100,236) (30,833)
Income tax benefit (provision)........ (7,653) 2,477 (1,630)
--------- -------- --------
(Loss) before minority interests and
extraordinary item.................. (266,276) (97,759) (32,463)
Minority interests.................... 11,822 6,974 2,890
(Loss) from early extinguishment of
debt................................ -- -- --
--------- -------- --------
Net (loss)............................ $(254,454) $(90,785) $(29,573)
========= ======== ========
OTHER DATA:
Capital expenditures.................. $ 505,664 $452,680 $130,573
Ratio of earnings to fixed
charges(1).......................... -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 662,918 $ 996,896
Working capital............................................. 76,648 600,549
Fixed assets, net........................................... 5,229,317 3,854,430
Total assets................................................ 9,368,683 6,194,097
Long-term debt.............................................. 7,482,814 5,043,803
Senior Redeemable Exchangeable Preferred Stock.............. -- 124,127
Shareholder's equity........................................ 875,009 355,154
</TABLE>
(1) For the purposes of calculating the ratio of earnings to fixed charges,
fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to be
interest. For the nine months ended September 30, 1999 and the years ended
December 31, 1998, 1997, 1996, 1995 and 1994, our earnings were insufficient to
cover fixed charges by approximately $896.8 million, $565.7 million, $355.4
million, $257.1 million, $105.4 million and $31.8 million, respectively.
34
<PAGE> 39
UNAUDITED PRO FORMA FINANCIAL DATA
In March 1999, we acquired Diamond in exchange for our common stock. In
December 1998, we acquired EGT in exchange for cash and our preferred stock. In
October 1998, we acquired NTL Triangle in exchange for our common stock. On June
16, 1998, we agreed to acquire substantially all of the operations of ComTel in
a two-part transaction that was completed in September 1998 in exchange for
approximately L550.0 million in cash and preferred stock. The cash portion of
the purchase price of ComTel was financed using funds available under our credit
facility. The amounts borrowed under the credit facility were repaid with most
of the proceeds from the issuance of our 11 1/2% notes and 12 3/8% notes in
November 1998.
The unaudited pro forma financial data presented give effect to the
completed acquisitions of NTL Triangle, ComTel and EGT, all of which were
completed in 1998, and give further effect to the subsequent acquisition of
Diamond. The pro forma financial data is based on our historical financial
statements and the historical financial statements of NTL Triangle, ComTel, EGT
and Diamond. The statements of operations data reflects the translation of all
pound sterling denominated amounts at the average rate for the nine months ended
September 30, 1999 of $1.6137 = L1.00 and the average rate for the year ended
December 31, 1998 of $1.6571 = L1.00.
The acquisitions have been accounted for in the pro forma financial data
using the purchase method of accounting. Accordingly, the assets acquired and
liabilities assumed have been recorded at their fair values. In August 1999,
Telewest exercised its right to purchase all of our shares of Cable London and
all of our related rights and interests for the purchase price of approximately
L428.0 million (approximately $704.7 million) in cash. We established the
purchase price pursuant to a buy/sell agreement between the parties. The sale
was completed on November 21, 1999. The unaudited pro forma financial data give
effect to that sale.
The unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1998 and the nine months ended September 30, 1999 give
effect to the acquisitions and the Cable London sale as if they had been
consummated on January 1, 1998. The unaudited pro forma financial information
does not give effect to the proposed acquisition of CWC ConsumerCo by NTL
Incorporated or to the proposed financing of the acquisition.
NTL Triangle owned a 27.5% interest in Birmingham Cable Corporation
Limited. NTL Triangle accounted for this interest using the equity method. The
following pro forma financial data give effect to the sale of the Birmingham
Cable equity interest to Telewest prior to the acquisition of NTL Triangle by
NTL.
The pro forma adjustments are based upon available information and
assumptions that we believe were reasonable at the time made. The unaudited pro
forma condensed combined financial statements do not purport to present our
financial position or results of operations had the acquisitions occurred on the
dates specified, nor are they necessarily indicative of the financial position
or results of operations that may be achieved in the future. The unaudited pro
forma condensed combined statements of operations do not
35
<PAGE> 40
reflect any adjustments for synergies that we expect to realize commencing upon
consummation of the acquisitions. No assurances can be made as to the amount of
cost savings or revenue enhancements, if any, that may be realized.
36
<PAGE> 41
NTL COMMUNICATIONS CORP.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NTL
COMMUNICATIONS CORP. DIAMOND*
(HISTORICAL) (HISTORICAL)
-------------------- --------------
<S> <C> <C>
REVENUES................................................... $ 1,052,860 $ 28,798
COSTS AND EXPENSES
Operating expenses......................................... 507,335 10,046
Selling, general and administrative expenses............... 416,077 11,924
Franchise fees............................................. 22,287 --
Corporate expenses......................................... 18,475 --
Merger Costs............................................... -- 13,934
Depreciation and amortization.............................. 518,356 15,277
----------- --------
1,482,530 51,181
----------- --------
Operating loss............................................. (429,670) (22,383)
OTHER INCOME (EXPENSE)
Interest and other income.................................. 26,829 2,144
Interest expense........................................... (484,570) (25,561)
Other...................................................... 22,523 (40,572)
----------- --------
Net loss................................................... $ (864,888) $(86,372)
=========== ========
<CAPTION>
ADJUSTMENTS PRO FORMA
----------- -----------
<S> <C> <C>
REVENUES................................................... $ -- $ 1,081,658
COSTS AND EXPENSES
Operating expenses......................................... 517,381
Selling, general and administrative expenses............... 428,001
Franchise fees............................................. 22,287
Corporate expenses......................................... 18,475
Merger Costs............................................... (13,934) --
Depreciation and amortization.............................. 24,744(B) 558,377
-------- -----------
10,810 1,544,521
-------- -----------
Operating loss............................................. (10,810) (462,863)
OTHER INCOME (EXPENSE)
Interest and other income.................................. 8,993(D) 37,966
Interest expense........................................... -- (510,131)
Other...................................................... (18,049)
-------- -----------
Net loss................................................... $ (1,817) $ (953,077)
======== ===========
</TABLE>
- ---------------
* For the period from January 1, 1999 to date of acquisition (March 8, 1999).
37
<PAGE> 42
NTL COMMUNICATIONS CORP.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NTL NTL PRO FORMA
COMMUNICATIONS CORP. COMTEL BERMUDA EGT FOR PRIOR
(HISTORICAL) (HISTORICAL)* (HISTORICAL)* (HISTORICAL)* ADJUSTMENTS ACQUISITIONS
-------------------- ------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES..................... $ 747,015 $ 97,222 $105,348 $17,110 $ (789)(C) $ 965,906
COSTS AND EXPENSES
Operating expenses........... 372,134 62,393 33,965 7,893 -- 476,385
Selling, general and
administrative expenses..... 299,494 32,285 48,448 -- -- 380,227
Franchise fees............... 25,036 -- -- -- -- 25,036
Corporate expenses........... 17,048 -- 3,977 -- -- 21,025
Non-recurring charges........ (4,194) -- -- -- -- (4,194)
Depreciation and
amortization................ 266,112 41,035 37,202 3,157 29,229(B) 376,735
--------- -------- -------- ------- -------- ----------
975,630 135,713 123,592 11,050 29,229 1,275,214
--------- -------- -------- ------- -------- ----------
Operating loss............... (228,615) (38,491) (18,244) 6,060 (30,018) (309,308)
OTHER INCOME (EXPENSE)
Interest and other income.... 46,024 476 14,983 -- (20)(D) 61,463
Interest expense............. (328,815) (7,459) (49,477) -- (62,417)(E) (448,168)
Other........................ 4,152 -- (3,326) -- 11,574(D) 12,400
--------- -------- -------- ------- -------- ----------
Loss before income taxes..... (507,254) (45,474) (56,064) 6,060 (80,881) (683,613)
Income tax benefit........... 3,327 -- -- -- 3,327
--------- -------- -------- ------- -------- ----------
Loss before extraordinary
item........................ (503,927) (45,474) (56,064) 6,060 (80,881) (680,286)
Loss from early
extinguishment of debt...... (30,689) -- -- -- -- (30,689)
--------- -------- -------- ------- -------- ----------
Net loss..................... $(534,616) $(45,474) $(56,064) $ 6,060 $(80,881) $ (710,975)
========= ======== ======== ======= ======== ==========
<CAPTION>
DIAMOND
(HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ----------- -----------
<S> <C> <C> <C>
REVENUES..................... $ 147,078 $ -- $ 1,112,984
COSTS AND EXPENSES
Operating expenses........... 47,088 -- 523,473
Selling, general and
administrative expenses..... 61,573 -- 441,800
Franchise fees............... -- -- 25,036
Corporate expenses........... -- -- 21,025
Non-recurring charges........ -- -- (4,194)
Depreciation and
amortization................ 71,650 137,659(B) 586,044
--------- --------- -----------
180,311 137,659 1,593,184
--------- --------- -----------
Operating loss............... (33,233) (137,659) (480,200)
OTHER INCOME (EXPENSE)
Interest and other income.... 21,681 -- 83,144
Interest expense............. (140,234) -- (588,402)
Other........................ 12,553 -- 24,953
--------- --------- -----------
Loss before income taxes..... (139,233) (137,659) (960,505)
Income tax benefit........... -- -- 3,327
--------- --------- -----------
Loss before extraordinary
item........................ (139,233) (137,659) (957,178)
Loss from early
extinguishment of debt...... -- -- (30,689)
--------- --------- -----------
Net loss..................... $(139,233) $(137,659) $ (987,867)
========= ========= ===========
</TABLE>
- ---------------
* For the period from January 1, 1998 to the respective date of acquisition.
38
<PAGE> 43
NTL COMMUNICATIONS CORP.
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DIAMOND
----------
<S> <C>
A. PURCHASE PRICE AND ALLOCATION
PURCHASE PRICE
NTL Shares issued........................................... 15,938
NTL stock price (prior to closing).......................... $ 60.95
----------
Subtotal.................................................... 971,437
NTL stock options issued, fees and other costs.............. 14,679
----------
Purchase price.............................................. 986,116
Net tangible liabilities at date of acquisition............. 399,932
----------
Excess of Purchase Price over net tangible assets
acquired.................................................. $1,386,048
==========
ALLOCATED TO
Fixed assets................................................ $ 60,000
Customer lists.............................................. 78,408
License acquisition costs................................... 84,765
Goodwill.................................................... 1,162,875
----------
$1,386,048
==========
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
COMPLETED IN
1998 DIAMOND
------------ --------
<S> <C> <C>
B. DEPRECIATION AND AMORTIZATION
For the year ended December 31, 1998:
Depreciation of fixed asset allocation (over 15 years).... $ (126) $ 4,000
Amortization of intangibles (over 2-15 years)............. 72,145 141,644
Historical amortization of intangibles.................... (42,790) (7,985)
-------- --------
$ 29,229 $137,659
======== ========
</TABLE>
<TABLE>
<S> <C>
For the nine months ended September 30, 1999:
Depreciation of fixed asset allocation (over 15 years).... $ 734
Amortization of intangibles (over 2-15 years)............. 26,001
Historical amortization of intangibles.................... (1,991)
-------
$24,744
=======
</TABLE>
<TABLE>
<S> <C>
C. CONSULTING REVENUE
NTL Triangle consulting fee income for the year ended
December 31, 1998 which ceased upon the acquisition by NTL
Communications Corp......................................... $ 789
=======
D. EQUITY IN NET LOSS
NTL Triangle equity in the net loss of Birmingham for the
year ended December 31, 1998 which ceased upon the
acquisition by NTL Communications Corp.................... $11,574
=======
NTL Triangle equity in the net loss of Cable London which
ceased upon the sale of Cable London
For the year ended December 31, 1998...................... $ 20
=======
For the nine months ended September 30, 1999.............. $ 8,993
=======
</TABLE>
39
<PAGE> 44
<TABLE>
<S> <C>
E. INTEREST EXPENSE
For the years ended December 31, 1998:
Interest on ComTel debt not assumed....................... $(7,431)
Interest on the borrowings utilized to acquire
ComTel(1).............................................. 77,567
Amortization of fees on borrowings recorded as deferred
financing costs........................................ 2,015
Historical interest expense on NTL Triangle Credit
Facility(2)............................................ (9,734)
-------
Net Statement of Operations impact........................ $62,417
=======
</TABLE>
- ---------------
(1) On June 16, 1998, we agreed to acquire substantially all of the operations
of ComTel in a two-part transaction in exchange for approximately L550.0
million. A portion of the purchase price (L475.0 million) was financed
using funds available under our credit facility. The credit facility bore
interest at LIBOR plus 3% per annum increasing by 0.25% per annum each
month beginning three months after the first drawdown to a maximum of 4%
per annum. In November 1998, the credit facility was repaid using most of
the proceeds from the issuance of our 11 1/2% notes and 12 3/8% notes.
(2) This facility was repaid by NTL Triangle with the proceeds from the sale of
its interest Birmingham Cable.
40
<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As a result of the completion of the acquisitions of ComTel Limited and
Telecential Communications collectively known as ComTel in the second and third
quarters of 1998, Comcast UK Cable Partners Limited, now known as NTL Triangle
and Eastern Group Telecoms, known as EGT, in the fourth quarter of 1998, Diamond
Cable Communications plc in March 1999 and Cablelink Limited in July 1999, we
consolidated the results of operations of these businesses from the dates of
acquisition. The results of these businesses are not included in the 1998
results except for the results of operations of ComTel through September 30,
1998 and ComTel, NTL Triangle and EGT in the year ended December 31, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Local telecommunications and television revenues increased to $583,728,000
from $214,545,000 as a result of acquisitions and from customer growth that
increased our current revenue stream. The 1999 and 1998 revenue includes
$323,620,000 and $14,409,000, respectively, from acquired companies. We expect
our customer base to continue to increase which will drive further revenue
growth as we complete the construction of our broadband network past the
remaining homes in our franchise areas.
National and international telecommunications revenues increased to
$349,232,000 from $166,845,000 as a result of acquisitions, which was
$101,295,000 of the increase, and from increases in business telecommunications
revenues, internet services revenues and carrier services revenues. Business
telecommunications and internet services revenues increased primarily as a
result of customer growth. We expect our business telecommunications and
internet services customer base to continue to increase which will drive further
revenue growth. We are expanding our sales and marketing effort to business
customers and for internet services in our completed network. Carrier services
revenues increased due to growth in satellite services and telephone services
provided by our wholesale operation to broadcasters and telephone companies,
respectively. Revenue growth in carrier services is primarily dependent upon our
ability to continue to attract new customers and expand services to existing
customers. Recent new contracts should contribute to revenue growth in the near
term.
Broadcast transmission and other revenues increased to $119,900,000 from
$100,825,000 due to increases in broadcast television and FM radio customers and
accounts, which exceeded price cap reductions in our regulated services.
Broadcast television revenues are expected to increase in the future as digital
broadcasting revenues increase.
Other telecommunications revenues decreased to zero from $2,375,000 due to
the sales of the assets of our wholly-owned subsidiary, OCOM Corporation, to
AirTouch Communications, Inc. and to Cellular Communications of Puerto Rico,
Inc. during 1998.
41
<PAGE> 46
Operating expenses increased to $507,335,000 from $243,476,000 as a result
of increases in interconnection costs and programming costs due to customer
growth. The 1999 and 1998 expense include $179,968,000 and $5,511,000,
respectively, from acquired companies.
Selling, general and administrative expenses increased to $416,077,000 from
$192,070,000 as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base. In addition, approximately $32.1 million of the
increase was due to the new national brand and advertising campaign which began
in the second quarter of 1999 and will continue through 1999. The 1999 and 1998
expense includes $158,161,000 and $12,535,000, respectively, from acquired
companies.
Pursuant to the terms of various United Kingdom licenses, we incur license
fees paid to the ITC to operate as the exclusive service provider in certain of
our franchise areas. Franchise fees increased to $22,287,000 from $18,729,000.
The 1999 amount includes Diamond franchise fees of $3,517,000. We have requested
the ITC to convert all of our fee bearing exclusive licenses to non-exclusive
licenses by the end of 1999. Our liability for the license payments will end
upon the conversion.
Corporate expenses increased to $18,475,000 from $11,797,000 due to an
increase in various overhead costs.
Depreciation and amortization expense increased to $518,356,000 from
$156,785,000 due to an increase in depreciation of telecommunications and CATV
equipment. The 1999 expense includes $262,205,000 from acquired companies,
including amortization of acquisition related intangibles.
Interest expense increased to $484,570,000 from $226,422,000 due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on our existing deferred coupon notes. The 1999 expense includes
$132,112,000 from acquired companies. Interest of $172,109,000 and $94,734,000
was paid in the nine months ended September 30, 1999 and 1998, respectively.
Foreign currency transaction gains (losses) increased to a gain of
$22,523,000 from a loss of $6,973,000 primarily due to net foreign currency
transaction gains of $27,914,000 from acquired companies in 1999.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Our revenues increased from 1997 to 1998 by approximately 52% to
$747,015,000. This $255,240,000 increase in revenues was accompanied by only a
$70,490,000 increase in operating expenses, representing a 73% incremental
margin.
Local telecommunications and television revenues increased to $355,589,000
from $166,951,000 primarily as a result of customer growth that increased our
current revenue stream. The 1998 revenue includes $52,772,000 and $21,441,000
from ComTel and NTL Triangle, respectively. We expect our customer base to
continue to increase which will
42
<PAGE> 47
drive further revenue growth as we complete the construction of our dual service
network past the remaining homes in our franchise areas.
National and international telecommunications revenues increased to
$248,895,000 from $185,194,000 primarily as a result of increases in business
telecommunications revenues, internet services revenues and carrier services
revenues. Business telecommunications and internet services revenues increased
primarily as a result of customer growth. We expect our business
telecommunications and internet services customer bases to continue to increase
which will drive further revenue growth. We are expanding our sales and
marketing efforts to business customers and to internet services in our
completed network. Carrier services revenues increased due to growth in
satellite services and telephone services provided by our wholesale operation to
broadcasters and telephone companies, respectively. Revenue growth in carrier
services is primarily dependent upon our ability to continue to attract new
customers and expand services to existing customers. Recent new contracts should
contribute to revenue growth in the near term.
Broadcast transmission and other revenues increased to $140,156,000 from
$130,799,000 primarily due to increases in broadcast television and FM radio
customers and accounts, revenues from which outweighed the negative impact of
price cap reductions in our regulated services. Broadcast television revenues
are expected to increase in the future as digital television broadcasting
commences.
Other telecommunications revenues decreased to $2,375,000 from $8,831,000
primarily due to the sales of the assets of our wholly-owned subsidiary, OCOM
Corporation, to AirTouch Communications, Inc. and to Cellular Communications of
Puerto Rico, Inc. during 1998.
Operating expenses increased to $372,134,000 from $301,644,000 primarily as
a result of increases in interconnection costs and programming costs due to
customer growth. The 1998 expenses include $26,745,000 and $8,453,000 related to
ComTel and NTL Triangle, respectively.
Selling, general and administrative expenses increased to $299,494,000 from
$169,133,000 as a result of increases in telecommunications and cable television
sales and marketing costs and increases in additional personnel and overhead to
service the increasing customer base. The 1998 expenses include $31,212,000 and
$9,502,000 related to ComTel and NTL Triangle, respectively.
Franchise fees increased to $25,036,000 from $23,587,000 primarily as a
result of the inflation adjustment to the Northern Ireland license payment.
Corporate expenses decreased to $17,048,000 from $18,324,000 primarily due
to the sale of OCOM's assets in 1998. Certain OCOM personnel were included in
corporate expenses in 1997.
Nonrecurring charges of $20,642,000 in 1997 were comprised of restructuring
costs of $15,629,000 and deferred costs written-off of $5,013,000. The deferred
costs written off arose in connection with our unsuccessful bid for digital
terrestrial television multiplex licenses. Restructuring costs relate to our
announcement in September 1997 of a
43
<PAGE> 48
reorganization of certain of our operations. We consolidated the customer
operations departments that serve three franchise areas in England (excluding
the ComTel and NTL Triangle franchises) into one department and consolidated
certain operations and management groups within the Broadcast Services division,
as well as other consolidations or cessation of activities. This charge
consisted of employee severance and related benefit costs of $6,726,000 for
approximately 280 employees to be terminated, lease exit costs of $6,539,000 and
penalties of $2,364,000 associated with the cancellation of contractual
obligations. The consolidations have been completed, the lease exit costs are
for leases that extend over a number of years and the contract cancellations
have been completed. As of December 31, 1998, $9,172,000 of the provision has
been used, including $5,558,000 for severance and related costs, $1,450,000 for
lease exit costs and $2,164,000 for penalties associated with the cancellation
of contractual obligations. As of December 31, 1998, 177 employees had been
terminated. The $4,194,000 reversed in 1998 from changes in estimates of costs
to be incurred includes $1,168,000 for severance and related costs, $2,826,000
for lease exit costs and $200,000 for penalties associated with the cancellation
of contractual obligations. This reversal was necessary because employees whose
positions were eliminated chose to remain with us in other positions rather than
leave us and receive severance pay; and the real estate markets in which we
sublet space improved increasing the sublet rentals and shortening the period of
time required to find subtenants. The remaining restructuring reserve of
$2,263,000 is for lease costs net of sublease revenue.
Depreciation and amortization expense increased to $266,112,000 from
$150,509,000 primarily due to an increase in depreciation of telecommunications
and cable television equipment. The 1998 expense includes $31,091,000 and
$14,702,000 from ComTel and NTL Triangle, respectively, including amortization
of acquisition related intangibles.
Interest expense increased to $328,815,000 from $202,570,000 due to the
issuance of additional debt in 1998 and the increase in the accretion of
original issue discount on our existing deferred coupon notes. Interest of
$118,273,000 and $78,817,000 was paid in the years ended December 31, 1998 and
1997, respectively.
Other gains of $21,497,000 in 1997 include a gain on a sale of fixed assets
of $11,497,000 and a $10,000,000 payment from LeGroupe Videotron Ltee pursuant
to the settlement of a lawsuit.
Foreign currency transaction gains increased to $4,152,000 from $574,000
due to favorable changes in the exchange rate subsequent to the issuance in
March 1998 of new debt denominated in pounds sterling.
We recorded an extraordinary loss from the early extinguishment of debt of
$30,689,000 in 1998 as a result of the redemption of the 10 7/8% notes and the
repayment of the bank loan. In connection with the repayment of debt, a
subsidiary recorded an extraordinary loss of $4,500,000 in 1997 from the
write-off of unamortized deferred financing costs.
44
<PAGE> 49
YEARS ENDED DECEMBER 31, 1997 AND 1996
Local telecommunications and television revenues increased to $166,951,000
from $89,209,000 as a result of customer growth that increased our current
revenue stream.
National and international telecommunications revenues increased to
$185,194,000 from $45,430,000 as a result of the acquisition of NTL Group
Limited in May 1996, plus the new site acquisition, installation, design and
construction projects and additional site sharing revenue in 1997.
Broadcast transmission and other revenues increased to $130,799,000 from
$83,618,000 as a result of the acquisition of NTL Group Limited in May 1996,
plus the revenues from NTL Group Limited's ten-year contract with television
broadcaster Channel 5 in the United Kingdom which commenced in 1997.
Operating expenses increased to $301,644,000 from $144,315,000. NTL Group
Limited operating expenses in the year ended December 31, 1997 and in the period
from May 9, 1996, the date of acquisition, to December 31, 1996 were
$185,995,000 and $71,871,000, respectively. The remainder of the increase was
primarily the result of increases in programming and interconnection costs.
Selling, general and administrative expenses increased to $169,133,000 from
$114,992,000. NTL Group Limited selling, general and administrative expenses in
the year ended December 31, 1997 and in the period from May 9, 1996, the date of
acquisition, to December 31, 1996 were $18,799,000 and $9,384,000, respectively.
The remainder of the increase was the result of increases in telecommunications
and cable television sales and marketing costs and additional personnel and
overhead to service the increasing customer base.
Franchise fees of $23,587,000 and $13,117,000 in 1997 and 1996,
respectively, are for the Northern Ireland license. Franchise fee expenses were
incurred upon the start of operations in Northern Ireland in June 1996.
Corporate expenses increased to $18,324,000 from $14,899,000 primarily due
to an increase in personnel and related costs. The 1997 and 1996 amounts include
$1,852,000 and $2,906,000, respectively, of non-cash expense related to
non-compete agreements.
Nonrecurring charges of $20,642,000 in 1997 include restructuring costs of
$15,629,000 and deferred costs written-off of $5,013,000. Restructuring costs
include costs of employee severance and related costs, lease exit costs and
penalties associated with the cancellation of contractual obligations. The
deferred costs of $5,013,000 written-off arose in connection with our
unsuccessful bid for digital terrestrial television multiplex licenses.
Depreciation and amortization expense increased to $150,509,000 from
$98,653,000. The increase was primarily due to an increase in depreciation of
telecommunications and cable TV equipment. Depreciation and amortization expense
of NTL Group Limited and amortization of goodwill as a result of the acquisition
was $37,724,000 and $20,339,000 in the year ended December 31, 1997 and in the
period from May 9, 1996, the date of acquisition, to December 31, 1996,
respectively.
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Interest expense increased to $202,570,000 from $137,032,000 due to the
issuance of the 10% senior notes in February 1997, the issuance of the 7%
convertible subordinated notes in June 1996 and the increase in accretion of the
original issue discount on our existing deferred coupon notes. Interest of
$78,817,000 and $37,889,000 was paid in the years ended December 31, 1997 and
1996, respectively.
Other gains of $21,497,000 in 1997 include a gain on sale of fixed assets
of $11,497,000 and a $10,000,000 payment from LeGroupe Videotron Ltee pursuant
to the settlement of a lawsuit.
In connection with the repayment of debt, a subsidiary of NTL Group Limited
recorded an extraordinary loss in 1997 of $4,500,000 from the write-off of
unamortized deferred financing costs.
LIQUIDITY AND CAPITAL RESOURCES
We will continue to require significant amounts of capital to finance
construction of our local and national networks in the United Kingdom and
Ireland, for connection of telephone, telecommunications, internet and CATV
customers to the networks, for other capital expenditures and for debt service.
We estimate that these requirements, net of cash from operations, will aggregate
up to approximately $1.7 billion in the fourth quarter of 1999 and through
December 31, 2000. Our commitments for equipment and services at September 30,
1999 of approximately $276.2 million are included in the anticipated
requirements. We had approximately $662.9 million in cash and securities on hand
at September 30, 1999. In addition, NTL Incorporated had approximately $888.8
million in cash and securities on hand at September 30, 1999, excluding cash of
its subsidiaries, most of which is available to fund our cash requirements. We
will therefore need additional cash in order to fund these requirements, and we
are in discussions with various parties relating to sources of additional
financing.
Regarding our estimated cash requirements described above, there can be no
assurance that: (i) actual construction costs will not exceed the amounts
estimated or that additional funding substantially in excess of the amounts
estimated will not be required, (ii) additional financing will be obtained or
will be available on acceptable terms, (iii) conditions precedent to advances
under future credit facilities will be satisfied when funds are required, (iv)
we and our subsidiaries will be able to generate sufficient cash from operations
to meet capital requirements, debt service and other obligations when required,
(v) we will be able to access such cash flow or (vi) we will not incur losses
from our exposure to exchange rate fluctuations or be adversely affected by
interest rate fluctuations.
NTL Triangle closed the sale of its interest in Cable London in November
1999. The sale price was approximately L428.0 million (approximately $704.7
million). The sale of the Cable London interest is an "Asset Sale" for the
purposes of our indentures for certain of our notes. The proceeds of the sale
were used to purchase Cablelink from another member of the NTL group, in
satisfaction of our obligation to invest in "Replacement Assets" under the terms
of the indentures for some of our indebtedness.
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In July 1999, NTL Incorporated agreed to acquire the residential cable,
business cable, indirect residential telephony, residential internet and digital
television development and services business of CWC ConsumerCo. NTL Incorporated
will issue approximately 68 million new shares of its common stock and pay L2.85
billion ($4.7 billion) in cash. NTL Incorporated will also discharge, refinance
or assume approximately L1.9 billion ($3.1 billion) of CWC ConsumerCo's net
debt, plus further debt up to an agreed amount of CWC ConsumerCo cash outflow
between March 31, 1999 and the closing of the acquisition. The transaction is
subject to various approvals and other conditions. We and NTL Incorporated have
obtained a financing commitment for up to approximately L2.38 billion to fund a
portion of the cost of this acquisition. The commitment is subject to the
preparation, execution and delivery of loan documentation and the accuracy and
completeness of representations. The commitment expires on January 28, 2000,
unless definitive documentation has been executed and delivered.
In connection with the CWC ConsumerCo acquisition, NTL Incorporated
announced that France Telecom agreed to invest an additional $4.5 billion in NTL
Incorporated. France Telecom will invest $2.5 billion in NTL Incorporated common
stock issued at $74 per share and $2.0 billion in convertible preferred stock
with a 5% dividend. Each share of the 5% preferred stock would be convertible
into 10 shares of NTL Incorporated common stock (subject to antidilution
adjustments). The closing of the additional investment is subject to the
completion of the CWC ConsumerCo acquisition, unless France Telecom elects to
accelerate the closing of this investment. In the event France Telecom elects to
accelerate the closing of the investment, the proceeds will be used as mutually
agreed by NTL Incorporated and France Telecom prior to such closing.
We are highly leveraged. The accreted value at September 30, 1999 of our
consolidated long-term indebtedness is approximately $7.5 billion, representing
approximately 90% of total capitalization. The following summarizes the terms of
those notes issued by us and our subsidiaries, other than the notes.
NTL:
(1) 12 3/4% Senior Deferred Coupon Notes due April 15, 2005, principal
amount at maturity of $277.8 million, interest payable semi-annually
beginning on October 15, 2000, redeemable at our option on or after
April 15, 2000;
(2) 11 1/2% Senior Deferred Coupon Notes due February 1, 2006, principal
amount at maturity of $1.05 billion, interest payable semi-annually
beginning on August 1, 2001, redeemable at our option on or after
February 1, 2001;
(3) 10% Senior Notes due February 15, 2007, principal amount of $400.0
million, interest payable semi-annually from August 15, 1997,
redeemable at our option on or after February 15, 2002;
(4) 9 1/2% Senior Sterling Notes due April 1, 2008, principal amount of
L125.0 million ($205.0 million), interest payable semi-annually from
October 1, 1998, redeemable at our option on or after April 1, 2003;
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(5) 10 3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008,
principal amount at maturity of L300.0 million ($493.9 million),
interest payable semi-annually from October 1, 2003, redeemable at our
option on or after April 1, 2003;
(6) 9 3/4% Senior Deferred Coupon Notes due April 1, 2008, principal
amount at maturity of $1.3 billion, interest payable semi-annually
from October 1, 2003, redeemable at our option on or after April 1,
2003;
(7) 9 3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009,
principal amount at maturity of L330.0 million ($543.3 million),
interest payable semi-annually from October 15, 2004, redeemable at
our option on or after April 15, 2004;
(8) 11 1/2% Senior Notes due October 1, 2008, principal amount of $625.0
million, interest payable semi-annually from April 1, 1999, redeemable
at our option on or after October 1, 2003;
(9) 12 3/8% Senior Deferred Coupon Notes due October 1, 2008, principal
amount at maturity of $450.0 million, interest payable semi-annually
from April 1, 2004, redeemable at our option on or after October 1,
2003;
(10) 7% Convertible Subordinated Notes due December 15, 2008, principal
amount of $599.3 million, interest payable semi-annually from June 15,
1999, convertible into shares of NTL Incorporated's common stock at a
conversion price of $49.00 per share, redeemable at our option on or
after December 15, 2001;
(11) Variable Rate Redeemable Guaranteed Loan Notes due January 5, 2002,
principal amount of 80.0 million Irish punts ($109.1 million),
interest payable quarterly from July 9, 1999 at EURIBOR, (the interest
rate at September 30, 1999 was 2.698%), redeemable at any time, at the
option of the holder, at par plus accrued and unpaid interest to the
date of redemption, for which 87.0 million Irish punts ($118.7
million) is in escrow;
NTL TRIANGLE:
(13) 11.2% Senior Discount Debentures due November 15, 2007, principal
amount at maturity of $517.3 million, interest payable semi-annually
from May 15, 2001;
DIAMOND:
(14) 13 1/4% Senior Discount Notes due September 30, 2004, principal amount
at maturity of $285.1 million, interest payable semi-annually
beginning on March 31, 2000, redeemable at Diamond's option after
September 30, 1999;
(15) 11 3/4% Senior Discount Notes due December 15, 2005, principal amount
at maturity of $531.0 million, interest payable semi-annually
beginning on June 15, 2001, redeemable at Diamond's option on or after
December 15, 2000;
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(16) 10 3/4% Senior Discount Notes due February 15, 2007, principal amount
at maturity of $420.5 million, interest payable semi-annually
beginning on August 15, 2002;
(17) 10% Senior Notes due February 1, 2008, issued by Diamond Holdings plc,
a wholly-owned subsidiary of Diamond, principal amount of L135.0
million ($222.3 million), interest payable semi-annually as of August
1, 1998;
(18) 9 1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings
plc, principal amount of $110.0 million, interest payable
semi-annually as of August 1, 1998; and
(19) mortgage of L2.5 million ($4.1 million) to fund the construction of an
office building, repayable over 20 years as of July 31, 1995, interest
at LIBOR plus 1 1/2%.
We have other significant commitments or potential commitments in addition
to those described above. These are as follows:
(1) We have certain exclusive local delivery operator licenses for
Northern Ireland and other franchise areas in the United Kingdom.
Pursuant to these licenses, various subsidiaries are required to make
monthly cash payments to the ITC during the 15 year license terms. We
paid L14.4 million ($22.3 million) through September 30, 1999 in
connection with these licenses. At our request, effective from January
1, 2000, the ITC agreed to revoke all of our exclusive local delivery
service licences which require the payment of a cash bid, and replace
them with a non-exclusive local delivery service licences, covering
the whole of the United Kingdom, which do not require the payment of a
cash bid.
(2) In July 1999, we acquired certain broadband cable franchises from
British Telecommunications plc ("BT") for an aggregate of up to L19.0
million ($31.2 million). We paid approximately L5.0 million ($8.2
million) on closing and will pay up to L14.0 million ($23.0 million)
on completion of the upgrade of certain networks. We expect to invest
approximately L15.0 million ($24.7 million) to upgrade the networks
for digital cable, interactive services and high speed internet
access. We lease the networks from BT on a long-term basis for an
annual lease payment of approximately L3.9 million ($6.4 million).
Management does not anticipate that we and our subsidiaries will generate
sufficient cash flow from operations to repay at maturity the entire principal
amount of our outstanding indebtedness or that of our subsidiaries. Accordingly,
we may be required to consider a number of measures, including:
(1) refinancing all or a portion of such indebtedness,
(2) seeking modifications to the terms of such indebtedness,
(3) seeking additional debt financing, which may be subject to obtaining
necessary lender consents,
(4) seeking additional equity financing, or
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(5) a combination of the foregoing.
Our operations are conducted through our direct and indirect wholly-owned
subsidiaries. As a holding company, we hold no significant assets other than
cash, securities and our investments in and advances to our subsidiaries.
Accordingly, our ability to make scheduled interest and principal payments when
due to holders of our indebtedness may be dependent upon the receipt of
sufficient funds from our subsidiaries.
From time to time NTL Incorporated may fund its capital requirements
outside the United Kingdom and Ireland from dividends from us subject to certain
conditions under the indentures governing our senior notes. We distributed
$500.0 million to NTL Incorporated in April 1999. We may use cash from equity
proceeds in excess of cumulative EBITDA (as defined in the indentures governing
our senior notes) minus 1.5 times cumulative interest expense plus capital stock
proceeds, for dividend payments to the extent such funds are not used for other
Restricted Payments (as defined in the indentures governing our senior notes).
NTL Incorporated intends to repay certain amounts to us when funds become
available. Currently there are no funds available to NTL Incorporated from us,
because the Senior Increasing Rate Notes prohibit us from making dividend
payments or other distributions to NTL Incorporated.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash provided by operating activities was $20,304,000 and cash used in
operating activities was $27,656,000 in the nine months ended September 30, 1999
and 1998, respectively. The change is primarily due to changes in operating
assets and liabilities.
Purchases of fixed assets were $855,667,000 in 1999 and $464,944,000 in
1998 as a result of the continuing fixed asset purchases and construction in
1999, including purchases and construction by acquired companies.
Proceeds from borrowings, net of financing costs, of $1,125,494,000 in 1999
is from the issuance of the 9 3/4% Notes and from the issuance of the Senior
Increasing Rate Notes and the Variable Rate Redeemable Guaranteed Loan Notes
issued in connection with the Cablelink acquisition. Proceeds from issuance of
preferred stock and warrants of $500,000,000 in 1999 is from the sale of 5.25%
Convertible Preferred Stock and warrants to purchase 1.5 million shares of NTL
Incorporated's common stock to Microsoft Corp. The distribution to NTL
Incorporated of $500,000,000 in 1999 was primarily for NTL Incorporated's
acquisition of the Australian National Transmission Network.
YEAR 2000
We had a comprehensive Year 2000 project designed to identify and assess
the risks associated with our information systems, products, operations and
infrastructure, suppliers, and customers that are not Year 2000 compliant, and
to develop, implement and test remediation and contingency plans to mitigate
these risks. To date, we have not experienced any significant problems related
to the Year 2000.
Because we use a variety of information systems and have additional systems
embedded in our operations and infrastructure, we cannot be sure that all of our
systems
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will work together in a Year 2000-ready fashion. Furthermore, we cannot be sure
that we will not suffer business interruptions, either because of our own Year
2000 problems or those of third-parties upon whom we are reliant for services.
Therefore, a problem that has not yet been identified may arise and could have
adverse consequences to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
To the extent that we obtain financing in U.S. dollars and incur costs in
the construction and operation of our networks in various other currencies, we
encounter currency exchange rate risks. At September 30, 1999, we had cash and
cash equivalents of approximately $418.0 million in pounds sterling and $2.7
million in Irish punts to reduce this risk. In addition, our pounds sterling
denominated indebtedness also reduces this risk. We also have approximately
$118.7 million in euros in escrow as cash collateral for the Variable Rate
Redeemable Guaranteed Loan Notes. Furthermore, our revenues are generated
primarily in British pounds sterling while our interest and principal
obligations with respect to most of our existing indebtedness are payable in
U.S. dollars. We have entered into an option agreement to hedge some of the risk
of exchange rate fluctuations related to interest and principal payments on U.S.
dollar denominated debt and for parent company expenses up to an annual limit of
approximately $13.0 million. We may purchase U.S. dollars at a fixed rate of L1
to $1.40 on specified dates through June 2001 for specified amounts of U.S.
dollars. The dates and U.S. dollar amounts correspond to our interest and
principal payment dates and amounts for a portion of our U.S. dollar denominated
debt and anticipated amounts of parent company expenses. In addition, NTL
Triangle has option agreements of L250.0 million notional amount to purchase
U.S. dollars at a fixed rate of L1 to $1.35 in November 2000. This option
provides a hedge against an adverse change in exchange rates when interest
payments commence on NTL Triangle's U.S. dollar denominated discount debentures.
There have been no material changes in the reported market risks since the
end of the most recent fiscal year.
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BUSINESS
We are a leading broadband communications company in the United Kingdom and
the Republic of Ireland. We provide residential, business, and carrier customers
with a broad array of competitive communications products and services including
the following:
- RESIDENTIAL SERVICES, including residential telephone, cable television,
PC-based and television-based internet access and interactive services.
With our acquisition in July 1999 of Cablelink in Ireland, we are the
largest provider of broadband services in the UK and Ireland with
approximately 2.2 million customers, including internet service
customers. We are also the first broadband provider in the UK to launch
high-speed cable modem internet services. In the franchises which we have
been developing since 1993, we have almost 47% customer penetration, an
average monthly revenue per customer of between $55 and $60, with a gross
margin of approximately 60% and a monthly churn rate of approximately 1%.
Additionally, approximately 40% of our customers pay by direct debit
thereby simplifying our billing and collections process.
- NATIONAL TELECOMS SERVICES, including business telecoms, national and
international carrier telecommunications, internet services and satellite
communications services. We currently serve over 45,000 business and
carrier customers including: Cisco, Sun Microsystems, Microsoft, MCI
Worldcom, AT&T, Colt, Turner Broadcasting Systems and the BBC.
- BROADCAST TRANSMISSION AND TOWER SERVICES, including digital and analog
television and radio broadcast transmission services, wireless network
management and tower site rental services. We broadcast channels for
customers such as Turner Broadcasting Systems, Flextech, the BBC and QVC.
We serve our broadcasting and wireless communications customers under
long-term contracts that account for $1.8 billion of our company-wide $2.5
billion forward order book.
The industries in which we compete are growing rapidly as a result of
technological developments and the resulting increase in demand for bandwidth
and information handling capacity. The integration of communications services
and the internet, as well as the development of digital wireless communications
services, is resulting in numerous growth opportunities for us.
Our success to date has been due largely to our focus on customer service
and the development of product offerings that emphasize value rather than simply
price discounts. Our product offerings incorporate our fundamental customer
proposition of providing our customers with choices:
"To allow our customers to buy what they need and pay for what they use"
We believe that this simple construct has allowed us to achieve and
maintain the industry leading customer penetration and customer retention levels
within the franchises that we have been developing since 1993. We recently
expanded our consumer services through the national offer of PC and
television-based internet access in combination with indirect access telephone
services. We believe these products will allow us to increase our
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target market dramatically by offering our services to residences which will not
be passed by our local broadband network infrastructure.
In the business market our sales strategy employs a mixture of telephone
sales and marketing for single line businesses and a direct and consultative
sales approach for the larger businesses. We are market-driven and have
segmented our business market into communities of interest -- for example,
education, government and industry.
Our sales and marketing teams are structured to support a focused approach:
- through a regionally focused sales and marketing structure; and
- through a dedicated team of national account managers interfacing with
the largest national accounts including many of the other
telecommunications carriers.
Our competitive position is underpinned by the $5.2 billion investment we
have made in our network infrastructure. This investment allows us to serve
every residence, business, school, hospital and public institution in the UK
that is either directly connected to our network or indirectly through the BT
telephone network. This network infrastructure consists of:
- BROADBAND COMMUNICATIONS NETWORKS that are high-capacity two-way local
broadband fiber networks that serve entire communities throughout our
regional franchise areas. Our fiber optic cables pass most businesses in
our regional franchise areas and are connected to nodes which are
typically within approximately 500 meters of each of the 600 homes
typically served by each node. Each home is then connected by a "Siamese"
cable consisting of two copper pair telephone wires and a coaxial cable,
allowing us to deliver telephone, cable television and internet services
over a single integrated network. This "Siamese" cable also allows us to
deploy both cable modems and DSL technology for the provision of broadband
communications services.
The following is an illustration of this cabling.
Graphic of Two Pair of Telephone Wires]
- A NATIONAL/INTERNATIONAL SYNCHRONOUS DIGITAL HIERARCHY (KNOWN AS SDH)
FIBER OPTIC TELECOMMUNICATIONS NETWORK which connects all of the major
population centers in the UK to one another on our owned facilities and
to Ireland, Continental Europe and the United States through our owned or
leased facilities. In the UK, our self-healing, fully redundant 3,500
mile backbone network utilizes Asynchronous Transfer Mode technology
(known as ATM), a high-speed switching technique that uses fixed size
cells to transmit voice, data and video. The network was built with two
ducts and sufficient capacity to accommodate over 2,300 fibers on the
majority
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of its routes. We have designed this network to allow us to place the
active components (such as routing devices) at its edge and close to our
customers. This design will ultimately reduce our costs and increase our
ability to offer a broad range of voice and data solutions.
'[NTL's National Backbone Network Graphic]'
- NATIONAL BROADCAST TRANSMISSION AND TOWER NETWORK INFRASTRUCTURE in the
UK which provide national, regional and local broadcast and wireless
communications coverage and is comprised of over 1,450 tower sites in the
UK.
Our fixed line and tower-based networks in the UK are interconnected and
- allow us to provide our customers with flexible products, packages,
solutions and prices. For example, each of our regional broadband
networks is connected to our national/international SDH fiber network,
allowing us to carry voice and data traffic between customer sites
throughout the UK and Ireland and significantly reduce our interconnect
charges. This flexibility has allowed us to develop and launch the UK's
first distance insensitive telephone tariff, "NTL 3-2-1 Pence," which is
a flat rate per minute tariff that is designed to charge customers a rate
which is determined by when they call, not where they call. All internet
traffic is charged at 1p per minute regardless of the time of day; and
- our national tower infrastructure has allowed us to connect business
customers to our national and international facilities with point to
point microwave links in situations where fiber connections are not
feasible. We expect this opportunity will be further expanded by a local
loop access solution that utilizes our national 10Ghz point to
multi-point wireless broad band license, comprising 30Mhz of spectrum,
allowing us to connect business customers to our networks with broadband
wireless links.
RECENT ACQUISITIONS
During the last year, we completed and announced a series of acquisitions
that have enhanced the scale and scope of our business dramatically. We acquired
Comcast UK (NTL Triangle), Comtel, Diamond, Cablelink and BT cable franchises in
Westminster and Milton Keynes which increased our franchise homes by
approximately 180% to approximately 5.9 million homes. As a result of these
acquisitions, we became the largest provider of broadband communication services
in the UK and Ireland with approximately 2.2 million customers, including
internet services customers. We intend to build upon our success and experience
to develop and improve the operating results of these acquired franchises.
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In respect of possible future acquisitions, we intend to utilize our
experience and industry-leading success in developing and operating any newly
acquired businesses. In addition, our existing UK national fiber network
currently has connectivity to Continental Europe and we intend to integrate this
network with any communications networks acquired by NTL Incorporated in the
future. NTL Incorporated intends to duplicate selectively our UK model in
additional markets that will provide it with an opportunity to capitalize on our
experience in the UK. Our management believes that together we have a number of
competitive advantages to bring to European opportunities.
IRELAND. In July, we acquired Cablelink, Ireland's largest cable operator
with franchises in Dublin, Waterford and Galway. Cablelink has achieved 83%
customer penetration, serving over 360,000 customers out of its 420,000 fully
built franchise homes. Ireland is a major communications market and after the
US, accounts for the highest amount of incoming and outgoing telephone traffic
to and from the United Kingdom. We plan to upgrade the Cablelink networks for
the provision of digital cable, telephone, internet and interactive services and
expect to increase the average gross profit contribution of the installed
customer base through the sale of these services. The Dublin franchise is
expected to be connected to our Sirius Cable, the only SDH fiber optic link
between the UK and Ireland, allowing us to connect the system to our UK network
and serve the franchise with a digital cable feed from our digital media center
in the UK. This connection to our backbone network should also allow us to
capitalize on the international voice traffic flows between the UK and Ireland
(traffic to the UK accounts for approximately 75% of all international calls
from Ireland). We expect the acquisition to benefit from other operating
efficiencies as well, including those resulting from the integration of
Cablelink with our operations in Northern Ireland.
CORPORATE STRATEGY
Our objective is to exploit the convergence of the telecommunications,
entertainment and information services industries to become the leading full
service broadband communications company in the markets in which we compete. We
offer services to residential, business and wholesale customers on a national
and an international scale. We believe that we will be able to deliver our
strategy through our entrepreneurial approach, innovative marketing,
state-of-the-art network and technical excellence. We are currently employing
several strategies to achieve our objective:
- INSTALLING FLEXIBLE INTEGRATED FULL-SERVICE NETWORKS. Our integrated
full-service networks provide a high-speed, high-capacity, two-way
communications pathway to the consumer that is capable of delivering new
services which are emerging from the convergence of telecommunications,
information and entertainment. This strategy allows us to pursue four
revenue streams -- residential cable television, residential telephone,
business telecommunications services and internet services -- without
significant incremental cost or capital investment.
- MAXIMIZING NETWORK CAPACITY UTILIZATION. We believe the fixed cost
structure of building communications networks allows us to gain
significant operating efficiencies from incremental services provided
over our networks. In our local franchise areas, our strategy is to
maximize gross profit contribution per home passed, rather
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than revenue per customer, by increasing overall penetration of the
number of services provided over our network. Examples of this strategy
are the development of bundled product offerings that encourage
subscriptions to multiple services, multiple television pricing plans
that appeal to differing and distinct market segments and price points,
and more "a la carte" and transaction-oriented services which increase
network utilization. This strategy resulted in the design and launch of
the "Choices" marketing packages described below under "Residential
Services -- Products, Services and Marketing," which increased our
overall penetration rates as well as our overall percentage of dual
subscribers.
- FOCUSING ON TARGET MARKET SEGMENTS. We believe that tailoring our
services to the needs of our customers will increase the penetration of
these services. Examples of tailored services include the development of
private telecommunications networks geared to "captive" local
organizations such as governmental and educational institutions. We have
a track record of distinguishing ourselves by providing flexible and
customized solutions to meet our customers' individual requirements.
- PROVIDING SUPERIOR CUSTOMER SERVICE. We believe customer service and
attentiveness to the needs of customers are critical to the continued
growth of our residential and business services. We operate multiple
customer call centers, including three large call centers in Luton, South
Wales and Central Scotland, as well as multiple call centers throughout
the regions of our recently acquired businesses. Calls are answered at
most locations 24 hours a day, 365 days a year. The customer call centers
currently employ approximately 500 people, who are specially trained to
deal with customers' inquiries and needs with respect to our various
products and services. Each customer representative attends an in-house
specialized training program, which is focused on increasing a
representative's knowledge of our corporate culture and products and
providing the individual with specific sales skills as well as a better
understanding of the level of service expected to be provided to
potential and existing customers on an ongoing basis. Finally, as we
recognize the importance of installation in the customer's satisfaction
with the services, we have focused on monitoring installers' performance
closely to ensure compliance with strict quality standards and scheduling
installations to suit customers' requirements.
- DEVELOPING ADVANCED MANAGEMENT INFORMATION SYSTEMS. We believe that
advanced management information systems are critical to effectively,
efficiently and accurately serving our customers. We use proprietary
software to handle our subscriber management functions from one central
location. The system uses Windows-based software and can handle both
business and residential customers as well as telephone, cable television
and internet services on a single platform. It is capable of managing our
tariff and discounting structures, and will also allow for the
introduction of new telephone and cable television services, such as 0800
numbers. Additionally, the system provides the functionality to support
the customer representatives' inquiry handling and contributes to our
high level of customer service. For example, customer representatives
have on-line access to customers' billing, payment and subscription
histories. Because this is a proprietary system, we have the ability to
upgrade the system to meet our developing needs. To this end,
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we employ our in-house staff of IT professionals to make sure the system
retains its robustness.
- GAINING COST EFFICIENCIES. We gain cost efficiencies by centralizing
some services provided to the franchise areas in our head office in Hook,
England. Examples include network planning, marketing, finance,
information systems and legal affairs. Alternatively, those cost centers
which are critical to penetration are located as close to the customer as
possible. Examples include construction management, sales, customer
service, and network maintenance, which are all located in each of our
regional areas.
NATIONAL CORPORATE BRANDING
In June 1999, we launched an approximately $65.0 million national
advertising campaign in the UK to promote NTL as the UK's complete
communications company serving both the residential and the business markets.
This campaign coincided with a relaunch of the NTL brand itself, which replaced
all of our distinct brandnames (such as CableTel, Comcast, Diamond and ComTel).
Along with highlighting our ability to provide customers with unique
communications services throughout the UK, the new campaign builds on our core
aim of simplifying technology for the benefit of business and residential
customers. Extensive consumer research showed that customers were confused by
the technologies available and unable to make informed decisions with ease.
RESIDENTIAL SERVICES
We are a national provider of telecommunications, entertainment and
internet access services to residential customers throughout the United Kingdom
and Ireland. Our local franchise areas cover approximately 5.9 million homes,
spanning a broad geographic area across England, Scotland, Wales, Northern
Ireland and the Republic of Ireland. Our networks serve entire regional
communities, passing virtually every home, business, and government institution.
We currently provide our telephone services over traditional telephone wires and
our cable services over a coaxial cable connection. We estimate that our local
franchise networks (not including our national network) cover approximately
7,000 route miles of fiber backbone network, with approximately 400,000 fiber
miles, and an estimated 75,000 route miles of coaxial/copper connections. These
full-service networks are capable of providing a high speed, high capacity,
two-way voice, data and video communications pathway to every customer. This
approach allows us to pursue four revenue streams (residential telephone,
residential cable television, internet services and business telecommunications
services) without a significant increase in fixed investment. A graphical
depiction of our regional networks appears below.
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NTL'S REGIONAL NETWORK
[NTL'S REGIONAL NETWORK GRAPHIC]
Our cable entertainment network employs a coaxial cable and is built to a
750MHz specification, which is easily expandable to 1 GHz of capacity. The
network currently has an active reverse path that allows us to provide impulse
pay-per-view. Most importantly, the fact that we have installed both two pairs
of telephone wires and coaxial cables into each of our customers' homes allows
us the advantage of deploying either of the major high bandwidth communications
technologies that are developing today: cable modems and xDSL solutions. The
graphic below depicts this advantage.
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NTL'S NEIGHBORHOOD NETWORK
[NTL'S NEIGHBORHOOD NETWORK GRAPHIC]
NETWORK DESIGN. We are installing our broadband and telecommunications
network using established state-of-the-art technology, deploying fiber optics
directly to highly concentrated business areas and residential nodes typically
averaging 600 telephone lines or 600 homes respectively. We install spare duct
and can thus "pull" fiber into every home when economically justifiable. In this
manner, we achieve cost efficiencies and rapid deployment from using
standardized equipment, while retaining flexibility to expand and adapt our
network to technological advances with little or no additional construction
investment.
The design and construction of a new network varies depending upon several
factors including the number of route miles to be installed, density of homes
and businesses, type of road and sidewalk surface, and the architecture of the
network backbone. Each system has been designed with at least one head-end and
at least one telephone switching office. Each system's head-end and telephone
switching office is directly connected to each node by fiber optic cable. Each
node is then connected to a subscriber's premises. Construction of each system
has been planned on a neighborhood-by-neighborhood basis to allow revenue
generating operations to commence in a neighborhood as construction of the
portion of the system serving such neighborhood is completed.
FIBER OPTICS. The evolution of fiber optic technology over the past
decade, including increases in the capacity of laser transmitters and decreases
in the price of optical receivers, has enabled the economic deployment of fiber
optic cable much closer to the customer than in traditional coaxial cable
television and twisted copper pair telephone networks, thereby improving the
quality and capacity of the cable television and telephone service. The main
advantages of deploying fiber in place of both coaxial cable or copper wire are
its smaller size, greater capacity, freedom from electrical interference, and
significant reduction of the requirement for periodic maintenance. We deploy
fiber to nodes which are normally less than 500 meters from the furthest home.
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<PAGE> 64
NETWORK ARCHITECTURE. Our broadband networks are being built with an
initial capacity of 750 MHz, which is sufficient to carry over 60 analog
channels of television. With digital compression of the television signal, many
more channels can be transmitted. The system is upgradeable to 1 GHz. Generally,
a maximum of one amplifier is required between the head-end optical receivers
and a home. Traditional cable systems often employ "cascades" of more than 5
amplifiers which degrade signal quality and increase the chances of system
failure.
Our local telecommunications network uses an SDH self-healing
redundant-ring based architecture, which improves our ability to flexibly deploy
capacity and further enhances system resilience. Telephone signals are carried
from the node to the home over traditional copper pair, over a shorter distance
than in traditional telephone networks, which improves signal quality and allows
higher bandwidth services such as ADSL to be more easily deployed. Within a
residential node, we use a dual drop consisting of "Siamese" coaxial cable,
capable of transmitting up to 1 GHz of bandwidth, and two copper twisted pairs
capable of providing two telephone connections. Moreover, the dual drop is
placed in an underground conduit that has capacity for a fiber drop in the
future. Large business customers are connected to the telephone network directly
through fiber optic cable or microwave links.
Our network design allows us to implement either of the two main broadband
local-loop solutions: Cable Modems and DSL. The use of xDSL Technologies could
enable us to exploit our copper wire assets more fully. We already use HDSL to
meet the needs of particular business customers. ADSL speeds vary according to
the length of the copper wire loop; the advantage that we have compared to an
established telephone company is our relatively short copper wire
runs -- typically under 500 meters. This facilitates down-load speeds of over 6
Mb/s.
PRODUCTS, SERVICES AND MARKETING We believe the most effective strategies
to achieve maximum revenues and maximum penetration is to bundle telephone,
cable and internet services. Our product and pricing strategies emphasize
choice, value, and quality and are designed to encourage subscription to
multiple services and maximize customer retention. We believe that people want a
value proposition based upon packages of services. We believe that our ability
to design attractive marketing plans and better service packages relative to our
competitors should have a positive effect on our penetration rates and customer
retention.
BUNDLED CABLE SERVICES In 1996 we implemented a promotional pricing and
packaging structure called "Choices" for our in-region telephone and cable
television service. We have continued to refine and enhance the initial package.
The current monthly price for the Starter Pack is L9.25, which is the same as
BT's monthly line rental charge as of October 1999. The Starter Pack offers the
customer:
- Telephone Service;
- Internet Access Service; and
- All six of the terrestrial channels, seven cable television channels and
our local TV channel; or
- A second telephone line.
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This means that our customers can receive their telephone line plus
internet access as well as cable television or a second telephone line for the
same monthly price that BT charges for telephone line rental alone. Our
customers can add either of the services they do not choose as a part of the
package for L5 each. The L9.25 price point was specifically chosen to provide
the customer with a simple price/value proposition: for the price of a BT
telephone line, we provide a telephone line and more. BT has a long history of
raising its line rental charge annually, creating a rising pricing umbrella
under which we can position our services. We continue to improve the packaging
structure in order to enhance its attractiveness to customers.
In addition to the Starter Pack entry packages our Choice Collections
packages enable the customer to select from several channel groupings each of
which can be purchased for an additional charge.
We believe that our bundled and flexible service package is responsive to
the desires and tastes of our customers. It emphasizes the "value" of our
residential telephone service by bundling it with a choice of additional
services for the price of BT's telephone line rental. As opposed to choosing
from a limited set of service options, the packages provide the customer the
opportunity to add services according to their individual tastes, and change
various aspects of the bundle rather than disconnect the service completely.
Through the use of our customer care and billing systems, we can change our
customers' services quickly and easily, thus encouraging each customer to choose
a package that meets his or her individual needs. We seek to gain incremental
revenues by selling additional products and services as well as encouraging
customers to purchase higher tier packages. The Starter Pack serves as a shop
window for other incremental services.
PAY PER VIEW SERVICES. We entered into a joint venture with Telewest for
the provision of a cable-only movie, sport and special events pay-per-view
television service called Front Row which was launched to our customers in March
1998. The joint venture represents the first-ever alternative to BSkyB in the
provision of movie and sports for pay television. Front Row has signed content
output contracts with major Hollywood studios, including Warner Brothers, Sony
Pictures Entertainment (Columbia/Tristar), the Walt Disney Company (Walt Disney
Studios, Miramax, Hollywood Pictures and Touchstone), Dreamworks, MGM and
Universal. Since its launch, Front Row has been very popular, currently selling
over 170,000 movies per month.
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CHOICES
<TABLE>
<S> <C>
STARTER PACK L9.25 TELEPHONE PRICING
- ---------------------------------------------- ----------------------------------------------
Includes: - 3,2,1 pence Nationwide
- - Telephone Line Rental and 3 pence for the day, 2 pence for the evenings,
- - Dial-up PC internet Access and 1 pence for the weekends
Plus choose one of the following: - 1 pence for internet access at all times
- - Television Service with six terrestrial and CHOICE COLLECTIONS
seven cable channels ----------------------------------------------
Or - Music & youth,
- - 2nd Telephone Line - Classic,
ADDITIONAL SERVICES - News & documentary,
- ---------------------------------------------- - Contemporary
- - Extra telephone line, Two TV packs L 8.00
or additional converter boxes L5.00 Four TV packs L13.00
each BSKYB PACKAGES
- - Advance features: reminder call, ----------------------------------------------
three-way calling, speed dialing, - Sky Sports 1 or 2 L16.00
call barring, voicemail, call divert, - Movie Collection L17.00
call waiting - Sport Collection L20.00
- - One feature L1.00 - Movie & Sports Collection L23.00
- - All Six L3.00 PAY PER VIEW
----------------------------------------------
- Movies on Demand
- Per Screening L2.99
</TABLE>
CHOICE COLLECTIONS
<TABLE>
<S> <C>
CHOICE COLLECTIONS CHANNEL LINE-UP
- ------------------------------------------ ------------------------------------------
Music and Youth MTV, VH-1, Cartoon Network, Rapture,
Trouble, The Box, Nickelodeon, BET on Jazz
Classic Granada Plus, Carlton Food, UK Gold,
Performance, Discovery Home & Leisure
News and Documentaries Discovery, History Channel, CNN, National
Geographic, Travel Channel, Animal Planet
Contemporary Sci-Fi, Turner Classic Movies, Paramount
Comedy Channel, Granada Men & Motors,
Granada Breeze, Bravo, Living
</TABLE>
TELEPHONE TARIFFS. As a result of our investment in our national fiber
backbone network, we are able to design and offer innovative telephone service
packages to our customers. By integrating our national telecoms network with our
local networks, we are able to bypass a portion of the wholesale long distance
fees charged by BT and other carriers for carrying calls to and from our local
telephone networks. This increased flexibility allows us to introduce more
volume-oriented and/or geographically based calling plans designed to give the
customer even greater choice and value. As an example, we recently launched "NTL
3-2-1 Pence", a per minute national call tariff of 3 pence during the day, 2
pence during the evening and 1 pence during the weekend. The tariff is designed
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to charge customers a rate which is affected by when they call, not where they
call. Internet access is 1p per minute of usage at all times. The simplicity of
this telephone tariff provides us with a distinct pricing advantage over BT.
While BT offers its customers a series of complex discount plans, our 3-2-1
pricing structure offers a clear and simple savings formula for customers.
The following table compares our tariffs to BT's published tariffs.
BASE CHARGES
<TABLE>
<CAPTION>
NTL BT*
----- -----
<S> <C> <C>
Line Rental................................................. L9.25 L9.25
Call Set Up Fee............................................. 3.5P 5.0p
</TABLE>
TELEPHONE PER MINUTE CHARGES
<TABLE>
<CAPTION>
TELEPHONE TARIFFS
(PER MINUTE)
------------------
NTL BT
------- -------
<S> <C> <C>
Local
Daytime..................................................... 3.00P 4.00p
Evening................................................... 2.00P 1.50p
Weekend................................................... 1.00P 1.00p
Short National
Daytime................................................... 3.00P 4.00p
Evening................................................... 2.00P 4.00p
Weekend................................................... 1.00P 2.00p
Long National
Daytime................................................... 3.00P 4.00p
Evening................................................... 2.00P 2.00p
Weekend................................................... 1.00P 2.00p
</TABLE>
- ---------------
* Includes 180 minutes of weekend phone calling every three months.
Residential Marketing. We market our local telecoms and television
service as an integral part of the emerging information super-highway. This
marketing strategy is continually being refined and includes the following
concepts in our advertising, literature and other materials:
- Positioning us as a local and national telephone company;
- Introducing alternative telephone service, multi-channel television and
internet access as the first of an expanding array of services which will
be carried on the network in the future; and
- Emphasizing that we are bringing "More Choice" in television viewing,
"Better Value" in telephone service and "State of the Art" communications
technology in providing access to the internet;
We employ an extensive direct marketing and selling approach to gain
customers. We begin by building a relationship with our communities before
construction commences in a
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given area by closely coordinating our upcoming activities with local government
authorities and community groups and eliciting feedback on ways to minimize
disruptions and inconvenience. Information packages and construction notices are
delivered to the neighborhood prior to construction. Our consumer affairs
advisors personally visit affected neighborhoods and households in order to meet
the special needs of the residents. All written and telephonic inquiries from
residents are input by name into a lead-tracking database, so that when areas
are released to marketing, our sales personnel have complete customer profiles
of the residents in their selling area.
We initiate our marketing in an area by direct mail, which is followed by a
personal appointment with a sales advisor. In some regions, the sales visit is
also preceded by the hand delivery to every household of a videotape that
describes us and our services. All information regarding both current and future
sales opportunities is entered into the database, and current sales information
is updated in our provisioning, billing and subscriber management system. Unsold
household data is maintained for future telemarketing, direct mail, and
re-marketing by the sales force.
Additionally, as part of our focus in ensuring and maximizing customer
retention, we usually charge an installation fee of L25.00. We adopt a one year
service agreement and encourage direct debit payment as the standard.
Approximately 40% of our customers elect direct debit as a means of payment. The
installation fee and one year contract provide qualifying mechanisms to ensure
that the customer understands and recognizes the value of the services, while
the encouragement of direct debit payment helps to avoid non-payment or
non-payment related cancellations.
NON-CABLE CUSTOMERS. In 1998, we extended our service offerings beyond
our franchise areas in order to offer a set of alternative service options to
over 18 million BT customers who are not passed by our local broadband networks.
By utilizing our investments in our National Telecoms Network, our International
Internet Facilities and our back office and billing operations, we launched a
set of products and services that allow us to provide telephone and internet
services to every home in the UK with a BT telephone line and a television. A
graphical depiction of this network solution appears below.
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[NTL'S REGIONAL NETWORK GRAPHIC]
The National Consumer Services, our first retail offering to the UK
consumer outside our franchise areas, have allowed us to significantly increase
our UK target market. We carry the consumer's telephone traffic via indirect
access for voice and internet calls. Using indirect access, the customer retains
their BT line, but the calls are automatically routed to our switch and national
network. We therefore receive the call revenue associated with the customer's
voice and internet traffic. The "off-net" customer receives the benefit of our
3-2-1 pricing while we receive the revenues from their telephone calls.
In the future, we plan to provide digital television services over a
digital terrestrial television box that will form part of our National Consumer
Services product offering. Digital Terrestrial Television will allow us to offer
customers throughout the UK a bundled offering of telephone, television,
internet and interactive services, that will mirror our in-franchise product
offerings. The bundle of services provides internet access via the personal
computer or through our TV-internet set top box which enables full internet
access without the need to purchase a PC. Customers simply use a keyboard and
set-top box to access the internet over their television. This is an important
market opportunity as it is estimated that of the 24 million UK TV homes, over
18 million homes do not have an internet capable PC or internet service.
NTL AND THE INTERNET
Internet use in UK homes, businesses and education is rising rapidly. We
regard data services as one of the three legs -- voice, data and video -- upon
which our business has been built. We provide internet services throughout the
UK. Our subscribers can take advantage of the high data rates provided by our
fiber network in order to access the internet via a personal computer or a
television. We offer both consumer and business internet services and own 49% of
VirginNet with Virgin Communications Limited. However, our involvement is not
simply based on enabling reliable internet access. Rather,
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we also operate to support the development of internet applications and usage.
We provide the backbone for VirginNet and Which? Online, with our call centers
handling around 4,000 calls a day for the two entities, consistently winning
awards for speed of service and customer satisfaction.
For companies, we offer reliable and scalable solutions for connecting to
the internet. These range from easy-to-connect dial up connections to fixed
access solutions for high volume, dedicated internet connectivity. Furthermore,
our extensive and expanding network of entry points guarantees rapid access to
the internet at all times. Other internet services available from NTL include:
firewalls, Web hosting, and virtual ISP services.
For the growing number of companies who wish to provide virtual internet
services, we act as a wholesale provider of internet services. Furthermore,
companies are increasingly turning to us for electronic commerce solutions and,
as a result, our internet services for businesses continue to grow. In all these
cases, we offer a unique set of assets:
- networks;
- technology;
- customers; and
- interactive content
INTERNET ACCESS, INTERACTIVE SERVICES AND ENHANCED TELEVISION. We have
moved rapidly to take advantage of, and drive the convergence between the
internet and the television. We are aggregating a broad range of interactive
content into a seamless service that can be deployed as part of our interactive
television services, such as TV-internet and digital cable. Our decision to use
open internet standards for these products has allowed us to rapidly integrate a
wide range of advanced technologies and partner with content companies who have
already developed sites for the internet. Because we have built our interactive
service offering on open internet standards, our platform allows these content
sources to be easily and cost effectively integrated to create a
television/entertainment experience rather than a computer-like experience. This
includes using the NTL user interface to allow simple navigation by remote
control. In designing the look and feel of our interactive services, we built
upon the UK's familiarity with teletext services by allowing customers to use
the familiar four color remote control buttons to navigate through the
interactive screens. These enhanced services will ultimately be deployed as part
of our digital cable offering within our franchise areas.
We have partnered with over 40 content providers to deliver a wide range of
interactive services, including education, home shopping and banking, travel,
entertainment, games, news, sport and local content. Content is organized in
channels which include news, sport, travel, entertainment and retailing. Already
over 100 brands are contracted to our interactive services. Partners include
Tesco and The Arcadia Group in the retail sector, ITN for news, the Sporting
Life for sports coverage and the BBC's Beeb service in entertainment. For
example, the travel channel allows viewers to search for travel destinations,
gather destination information and find travel deals from a large real-time
database. In addition, we are developing additional channels that will provide
games, education and financial and investment content. All partners have
contracted to provide a
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commission to NTL on e-commerce transactions and we have also formed a joint
venture to exploit the advertising opportunity associated with this service.
The next stage in the development of our consumer proposition is enhanced
television services. Enhanced television is the use of interactive technologies
to enable television programs to become interactive. Enhanced television can be
viewed as a modified form of interactive services which are constantly "on
supply" as the viewer watches television. Applications include the ability to
enable viewers to participate in game shows, access further information in
documentaries or respond directly to advertising. Viewers use their remote
controls to access the additional program information on demand. A graphical
representation of the enhanced TV system follows.
[ENHANCED TV DIAGRAM OF OVERALL SYSTEM & TECHNOLOGY PARTNERS]
A major advantage of our cable technology is that these enhanced television
links are not restricted to information delivered in the broadcast stream, a
major restriction of satellite delivered services. A broad range of additional
content can be delivered over the cable modem integrated in the digital TV set
top box. We are working with a number of major broadcasters to develop the
service and have already demonstrated a number of program pilots.
Delivering enhanced television service requires close coordination between
the program creation and the technology of the broadcast system. Our digital
media center is being developed with the ability to schedule the television feed
and to add the interactive components to the broadcast feed.
These new technologies not only provide a powerful new set of tools for
television producers, but also create large new commercial opportunities for
operators like us in providing a unique service to help acquire and retain
customers with a package of communications services. In addition, we can exploit
new revenue opportunities from e-commerce generated by the interactive elements
and from interactive advertising on existing television services.
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DIGITAL MEDIA CENTER. We have invested approximately $60.0 million in a
new media center which is at the heart of our digital operations. The center
acts as the marshaling point for all digital content, both television and
interactive. Television and interactive services are brought to the center over
satellite or fiber telecommunication links. Currently a 55 channel near video on
demand service is produced using advanced digital storage and server technology.
A complete sports channel, British Eurosport, is originated in the media center.
In addition to the interactive television elements, conditional access for pay
TV and electronic program guide datastreams are created and played out from the
center.
The new media center also houses the interactive servers for on-demand
elements and is the point at which the broadband cable modem path is routed to
access the internet. The interactive system, scheduling and conditional access
system are directly integrated with our customer management system. This allows
direct customer interface through the TV screen for billing, on-line help or
self-provisioning of new services. The system is controlled by a sophisticated
scheduling system and control room that monitors all channels. The resulting
service feed is carried from the center to each regional head-end using ATM
technology. This feed is then combined with local content, such as regional TV
channels for delivery over that local network. The system is capable of allowing
full flexibility of the regional line up of channels, for example to include
regional services from the major broadcasters, ITV, Channel 4 and the BBC.
The media center is connected to our UK national network and linked to our
satellite hubs for both in-bound and out-bound traffic. The system architecture
and flexibility allows the delivery of a customized service to any point
connected to our fiber telecoms network (for example, the current reach includes
Dublin which allows us to connect Cablelink's Dublin franchise to the media
center).
HIGH SPEED INTERNET SERVICE. In May 1999, we launched NTL HiSpeed
Internet, which links our broadband cable network to the internet at up to ten
times the speed of telephone. The new cable modem service operates at speeds of
up to 2.0 Mbps and will be offered at a minimum delivery speed of 512 Kbps. Our
HiSpeed Internet is an "always on" service, removing logging-on delays and the
need to log-off while using your telephone. It also utilizes the hybrid
fiber/coaxial cable television portion of our broadband network, leaving the
telephone line free to make or receive calls. This service is currently priced
at a flat rate of L40 per month.
In addition, we are in the process of implementing a commercial pilot of
ADSL technology in parts of our Surrey franchise. ADSL can be particularly
attractive for us to install because we have very short copper telephone line
runs to our customers' premises which is critical for clear, efficient data
transport. Typically, our customer is within 500 meters from a node whereas in
the United States, ADSL customers' premises may be more than 18,000 feet from
the end of the copper wire. As a result, ADSL is relatively easy for us to
deploy and attractive to the customer particularly because it is:
- Cost-Effective -- less costly than a cable modem internet connection
- Ratable -- customers buy the amount of bandwidth they need; and
- Secure -- it is a dedicated path, rather than the shared path of coax
cable.
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VIRGINNET. In addition to telecoms and data services we also offer
wholesale internet access solutions including network services, call center
operations, customer provisioning and billing to UK ISPs and other corporate
customers that would like to expand their internet presence. This service was
launched in 1995 as our first national product offering.
In 1996, we established the VirginNet joint venture with Virgin
Communications Limited. As of September 30, 1999, VirginNet had over 530,000
customers. The joint venture is 49% owned by NTL and 51% by Virgin. VirginNet
offers connectivity and proprietary content services to consumers and small
businesses throughout the UK. VirginNet recently launched a "free access"
product offering, whereby customers only pay for the minutes that they are
online or in contact with a customer care representative. We are able to support
this service profitably because we carry the majority of the VirginNet internet
traffic on our owned network facilities.
By integrating our internet infrastructure with our national telecoms
network we have been able to decrease the costs of providing these wholesale
services as well as increase the value of the proposition by retaining a higher
portion of the revenue from the data traffic that our customers generate. We
plan to continue to enhance our internet network, both nationally and
internationally, to accommodate the growth in the business.
OPERATING RESULTS
Based on trials and experiences in the UK and the prior experience of our
management in the United States telecommunications market, we have developed
innovative marketing strategies that have led to increased customer penetration
rates, customer retention and operating profitability.
As of September 30, 1999, pro forma for the acquisitions of ComTel, Comcast
UK, Diamond, and Cablelink (but excluding our 50% ownership of Cable London
which Telewest exercised its option to buy in August 1999) we had approximately
1.7 million residential customers, approximately 52% of which subscribed to both
telephone and television services. We counted a total of 2,584,800 million
revenue generating units (known as RGUs) resulting in approximately 45% customer
penetration, approximately 37% telephone penetration and approximately 37% cable
penetration, yielding 68% RGU penetration of homes marketed. An RGU is one
telephone account or one cable television account. A customer who takes
telephone and cable television service generates two RGUs.
NTL, on a standalone basis, prior to recent acquisitions, has achieved
industry-leading customer penetration and retention levels. As of September 30,
1999, approximately 92% of customers subscribed to both telephone and television
services. Our CATV penetration stands at 44% with telephone penetration at 45%.
This compares favorably to the UK industry average of CATV penetration of 24%
and telephone penetration of 29% achieved by our competitors. Similarly, NTL has
experienced an annual telephone and CATV churn rate of approximately 12% versus
the competitor churn rate of approximately 27%.
We believe this success has been largely due to our focus on customer
service and the development of product offerings that emphasize choice, value
and simplicity. We plan to apply our marketing and customer service skills to
enhance the operational performance of the combined entity. We also expect to
achieve significant operating synergies from the
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combined operations including economies of scale in content and equipment
purchasing, reduced telephone interconnect and call termination costs and
improved operating leverage.
The following table illustrates operating statistics of our broadband
networks:
<TABLE>
<CAPTION>
COMBINED PRO FORMA
NTL(1) NTL(1) NTL(2) NTL(3)
------------------------------- ------------- ------------- -------------
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------------- ------------- ------------- -------------
1996 1997 1998 1999 1999 1999
------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Homes passed(4)...... 779,100 1,007,000 1,247,000 1,335,800 3,667,300 4,262,600
Homes marketed
(Telephone).......... 467,300 810,000 1,064,600 1,137,600 3,146,600 3,146,600
Homes marketed
(Cable)............ 467,300 810,000 1,064,600 1,137,600 3,261,100 3,817,900
Total customers(5)... 168,200 321,300 471,000 529,800 1,291,800 1,705,700
Dual............... 133,800 287,200 434,000 489,500 879,100 879,100
Telephone-only..... 15,950 15,300 16,100 16,200 288,300 288,300
Cable
television-only.. 18,450 18,800 20,800 24,100 124,400 538,300
Total RGUs........... 302,000 608,500 905,100 1,019,300 2,170,900 2,584,800
Customer
penetration........ 36% 40% 44% 47% 40% 45%
Telephone
penetration........ 32% 37% 42% 45% 37% 37%
Cable television
penetration........ 33% 38% 43% 45% 31% 37%
RGU penetration(6)... 65% 75% 85% 90% 67 68%
</TABLE>
- ---------------
(1) Data for franchises owned and operated by NTL prior to 1998 acquisitions.
(2) Includes Comcast UK, Comtel and Diamond Cable (but excludes Cable London).
In August 1999, Telewest exercized its option to buy our 50% ownership of
Cable London.
(3) Gives effect to the acquisition of Cablelink in July 1999 and the BT cable
franchises.
(4) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to our
network.
(5) As of December 31, 1998, we also provided service to approximately 19,400
customers connected to acquired cable systems over which we do not offer a
full range of services.
(6) RGU penetration is the number of RGUs per 100 homes marketed.
Consistent with our objectives, our high penetration rates have led to
increased levels of gross profit contribution per home passed and thus
increasing rates of return on invested assets. Our success has been consistent
as we have increased our penetration for 14 consecutive quarters as shown by the
following graph (excluding our recent acquisitions).
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'[PERCENTAGE PENETRATION LINE CHART]'
The quality of our customer's experience is further evidenced by the
results published by OFTEL. These results are exhibited in the following table
and charts and highlight our improved performance over BT and our peers in a
number of measures which effect the quality of our residential customer's
experience.
NTL VS BT
[NTL'S REGIONAL NETWORK GRAPHIC]
<TABLE>
<CAPTION>
RESIDENTIAL CUSTOMERS
1998
------------------------
NTL TELEWEST CWC
---- -------- ----
<S> <C> <C> <C>
Faults Cleared.............................................. 98.1% 88.3% 75.7%
Reported Faults per 100 lines............................... 2.3 4.5 6.6
Orders Completed............................................ 97.7% 90.4% 83.2%
</TABLE>
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INDUSTRY STATISTICS
Our industry has demonstrated strong growth over the last several years.
The industry has now passed approximately 12 million homes (or 50% of the UK's
total TV homes) with a broadband communications network. As a result, the UK can
claim to have one of the most advanced communications infrastructures in the
world. In addition, since January 1, 1992, the industry has connected
approximately 4.5 million telephone lines. (During the same period, BT has also
grown, adding approximately 2.5 million telephone lines.) The following tables
illustrate these statistics:
<TABLE>
<CAPTION>
TELEPHONE LINES
--------------------------------------------------------------------------
RESIDENTIAL
RESIDENTIAL AND BUSINESS RESIDENTIAL TELEPHONE LINE
TELEPHONE LINES TELEPHONE LINES HOMES PASSED PENETRATION
------------------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
June 30, 1999...................... 4,571,274 3,993,215 12,171,351 33%
January 1, 1999.................... 4,070,866 3,567,786 11,904,341 30%
January 1, 1998.................... 3,442,196 3,038,809 10,693,809 28%
January 1, 1997.................... 2,278,113 2,039,081 8,351,310 24%
January 1, 1996.................... 1,419,819 1,287,248 6,042,296 21%
January 1, 1995.................... 717,566 649,350 4,116,971 16%
January 1, 1994.................... 314,381 279,728 2,786,202 10%
January 1, 1993.................... 106,989 92,715 1,954,829 5%
January 1, 1992.................... 21,225 N/A 1,343,557 --
</TABLE>
- ---------------
Source: ITC
<TABLE>
<CAPTION>
MULTI-CHANNEL HOMES
--------------------------------------------------------
TOTAL TOTAL DTH DTH
CUSTOMERS DTH HOMES AS A % OF TOTAL NET ADDITIONS
--------- --------- --------------- -------------
<S> <C> <C> <C> <C>
September 30, 1999.......................... 7,861,000(1) 3,582,000 46% 122,000
June 30, 1999............................... 7,442,000(2) 3,460,000 46.5% (87,000)
June 30, 1998............................... 6,899,000 3,547,000 51.4% 15,000
June 30, 1997............................... 6,372,000 3,532,000 55.4% 285,000
June 30, 1996............................... 5,022,000 3,247,000 64.7% 354,000
June 30, 1995............................... 4,163,000 2,893,000 69.5% 352,000
June 30, 1994............................... 3,477,000 2,541,000 73.1% --
</TABLE>
- ---------------
Source: BSkyB
(1) Includes 591,000 and 363,000 Eire and OnDigital customers, respectively at
September 30, 1999.
(2) Includes 589,000 and 204,000 Eire and OnDigital customers, respectively at
June 30, 1999.
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BUSINESS SERVICES
NTL's business and nonresidential services have undergone a significant
transformation in the last twelve months, as the company has moved away from a
simple product-based sales approach to a sector-based approach. In the business
market (comprised of government, industry, health and education sectors) this
sector approach enables us to provide a broad array of services ranging from
simple connectivity for small businesses to integrated solutions of voice, video
and data for large enterprises. These services are provided on local, regional
or national bases to more than 45,000 business customers. Our communication
products are appealing because of our highly reliable network services. In the
business market our reported faults (as compiled by the regulator, OFTEL) are
1.3 per 100 lines as compared to 3.3 per 100 lines, for BT, a statistically
significant difference.
In recognition of the developing needs and concerns of our large customers,
NTL Incorporated recently acquired Workplace Technologies, one of the UK's
leading data network service integrators. Workplace's consultancy services range
from the design and installation of data, voice and video networks to remote
monitoring and support of these networks. Workplace currently employs
approximately 500 people in the UK. We believe that large customers are more
interested in functionality of voice, video and data needs rather than driven by
cost concerns. It is currently expected that Workplace will be transferred to
NTL in the first quarter of 2000. The combination of network capability, ISP
experience, and the market presence of NTL will enable us to offer a unique and
comprehensive service to large customers.
Our objective is to provide high quality voice, data and video
communications services to businesses throughout the UK and to carriers which
require UK and international connectivity. According to published OFTEL
statistics, the total market for telecom services in the UK for the twelve
months ended March 31, 1998 was estimated at approximately L24.0 billion. Of the
total telecoms market, we estimate that approximately L13.0 billion represents
business telecoms and carrier telecom services. Our national network has
significantly expanded our telecoms opportunities beyond our franchise areas
allowing us to serve the much greater UK national market. We approach this
market by serving the following two market segments:
- National Business Telecoms
- Carrier Services
In addition, we serve a national base of customers for a variety of
telecommunications and related services using our national infrastructure of
towers. These lines of business are discussed in greater detail under the
"Broadcast Transmission and Tower Services" section below.
NATIONAL BUSINESS TELECOMS
In the business market, we describe ourselves as a "nationally competitive
but locally accountable" service provider, whose business purpose is to "enable
businesses to become more efficient and effective".
Our general business telecoms strategy is to provide comprehensive
communications solutions to our customers. Rather than simply offering our
customers a lower price for
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their existing service, we offer a package of services to the customer that is
designed to address all of their communications needs at a price which offers
good value for money. The services which we offer are often custom-designed for
the specific needs of the customer.
To date, we have been successful in obtaining telecoms contracts from
businesses located within our franchise areas. As of March 31, 1999, excluding
recent acquisitions, we had over 14,300 business customers and approximately
56,000 business telephony lines installed, which represented an increase of 80%
over the same period in 1998 for both customers and lines. Including our recent
acquisitions we have approximately 45,000 business customers and 150,000
business telephony lines installed.
Business Customers. While we offer our services to a wide array of
companies throughout the UK within our franchise areas, we focus upon education,
healthcare, local government, and media and information technology companies.
Our communications solutions are attractive to these customers because of our
reliable, high bandwidth services and our ability to package several services
together at attractive prices. In addition, we have a strong local presence due
to the localization of our facilities and the services we provide. As a result,
our customers view us as a community partner and benefit from our local account
management.
We use a variety of different access technologies to connect customers,
based on customer size, geographic location and our network reach. Access
technologies currently deployed in our network include fiber optics, copper wire
and microwave radio.
We connect our larger business customers to our network using fiber optic
cable. This utilizes the significant penetration of fiber that we have in our
local access network. As the cost of fiber falls, the size of business we will
connect with fiber extends correspondingly. We use copper wire pairs to connect
small enterprises.
An example of our sector focused strategy is our success in penetrating the
education market. We support customers at all levels of education within the
United Kingdom. One such customer is the UK's Joint Academic Network (JANET),
which is the UK's academic and research system connecting several hundred
institutions, including all UK universities, most higher education colleges and
most research establishments. SuperJANET is the broadband, or high-speed portion
of JANET. We developed high bandwidth metropolitan area networks in a number of
our regions throughout the UK to support SuperJANET.
Cambridge University is a SuperJANET node where we provide all of the
university's high-speed data circuits and approximately 10,000 local extensions,
including lines in 6,500 student dorm rooms. At Oxford University, students use
our links for access to SuperJANET, and more than 700 students also have our
phone lines in their dorm rooms. We also provide the services of the South Wales
Academic Network (SWAN). SWAN is a 60 mile fiber network, with 13 sites which
serve approximately 16,000 PCs, creating approximately 2 million e-mails and 12
million hits on the World Wide Web every month. SWAN will provide the gateway to
SuperJANET for 23 institutions of higher learning that was previously available
only to the Universities in Cardiff and Swansea.
Our program for education has not only provided value-added technology
services to universities, but has also accelerated the connection of local
secondary and primary schools
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to the internet. We provide services to more than 2,500 primary and secondary
schools. Funding for these connections has been provided by the National Grid
for Learning and the Technology Trust infrastructure campaign. We were the first
company in the UK to introduce an economical flat rate internet access package
to all schools within our franchise areas. To date, over 1,600 schools have
taken advantage of our attractive internet offers. In England, Technology
Colleges Trust has partnered with us to link up the trust's more than 650
schools. This will enable the schools, for a flat rate, to get unlimited usage
of a 2 Mbps broadband connection to a new supergrid.
Our schools initiative in Londonderry aims to provide free internet access
to every school in the city. This long term project will introduce modern
technology into education utilising our infrastructure. We will also host
approximately 150,000 e-mail accounts (one for every student and teacher) and
connect to all 568 schools in Hertfordshire County Council using ISDN and PSTN
dial up. Bedfordshire County Council now has all 270 schools connected to the
internet via our ISDN Select.
National Services. Capitalizing on our experience in local business
markets and the extended reach of our national network, we have expanded the
scope of our business in order to compete for a share of the business telecoms
market on a national basis. We believe that we can build on the strengths gained
in our local franchise areas to approach targeted business users located in
other areas of the UK, initially focusing on users with multiple business
locations. We launched our national business telecoms service in November 1997
and our strategy is to target medium and large businesses, beginning with those
located near the major urban areas currently served by our national network.
We have a variety of alternative methods to connect the "last mile" to the
customers' premises from the national network:
- As a certified national public telecommunications operator, we can
readily obtain the permits to construct telecoms networks, and can simply
build out our network to reach customers. Although this is often clearly
the most costly approach, the expense can be justified in the case of
large customers or when a significant level of traffic is obtained from
several customers. For example, we have extended our fiber optic network
in London to support CNN's facilities.
- We can lease circuits on the local networks of other service providers to
connect to the customer's premises. Although this may reduce the
operating margin on a particular account, it requires significantly less
capital expense than a direct connection, can often be installed
relatively quickly, and can be replaced at a later date if a more
profitable connection method can be deployed.
- We can also connect customers to our national network by implementing one
of two wireless bandwidth solutions, described in more detail below.
Wireless Bandwidth Delivery. We have already been successful in utilizing
our significant tower infrastructure to efficiently connect our network to
customers using digital point to point microwave radio links. As part of our
broadcasting businesses, we own or have direct access to over 1,450 tower sites
in attractive locations all across the UK. Microwave radio represents an
efficient and reliable method for connecting customer locations to the national
network.
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An illustration of the current use of our tower infrastructure to connect
our network to customers follows:
SERE Motor Group, Northern Ireland, CENTREX Network.
Illustration of three customer locations connected to a switch. The switch
is shown as connected to an NTL transmission tower which is shown as connected
by 'wireless fibre' to another location.
NTL Transmission Tower
Connections Graphic
In addition to the methods to connect the "last mile" described above, we have
been awarded a license to operate radio fixed access services on a national
basis throughout the UK at the 10 GHz frequency, comprising 30 MHz of spectrum.
With the 30 MHz, we will be able to transmit at 16 Mbps in any direction; our
goal is to be able to simultaneously operate in up to 12 directions from a
single base station, thereby enabling us to provide up to 192 Mbps from a
particular site. Furthermore, we believe the use of ATM across the 10 GHz
network will allow even greater capacity (up to 4x 192 Mbps) from a single base
station. This technology can be used as a "wireless local loop" alternative to
connect to customers which are not currently connected to our national network
via wired circuits. We intend to use this point-to-multipoint wireless service
where it represents a more efficient method to connect to customers than
traditional wired or point-to-point wireless links. The 10 GHz frequency of our
license is lower than the frequency which is being used by several major
wireless telephony providers in the US (for example, the US frequency allocation
for companies like Teligent and Winstar is typically in the 24-38 GHz band).
This lower frequency is advantageous because lower frequencies offer better
propagation and lower interference (and thus greater range) than higher
frequencies.
Using our 10 GHz service, we have the potential of reaching a large
customer base in regions not covered by our fiber network. A service launch in
the second or third quarter of 2000 of between five and six large markets is
currently being contemplated. In addition to
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London, we are considering Birmingham, Leeds, Bradford, and Bristol as initial
target markets. A total of 25 to 50 base stations will likely be deployed in
these areas.
We are currently evaluating the services that we will offer over 10 GHz. We
intend to take advantage of our national network as well as our ATM technology.
Our 10 GHz technology will use this ATM platform, to enable delivery of voice,
data and multimedia services to small and medium-sized business customers. Such
services include voice access, leased line, internet access, private internet,
LAN-to-LAN, and Frame Relay. We also intend to use the frequency for backhaul
purposes, where a wireless connection will be less costly to install than our
fiber or microwave links.
The following chart depicts the 10 GHz wireless local loop technology:
EDGAR DESCRIPTION OF PRINTED GRAPHIC
Illustration of five interlocking circles representing wireless local loop
areas. Each area is shown with a central base station. One local loop area is
shown with subscriber terminals within the area. Three of the areas are
connected to an ATM network. One of these connections is labelled
wireless/wireline backhaul. The ATM network is shown as connected to a central
office switch, billing server, network management server, TDM, database, ISP
router and frame relay.
We are currently undergoing test trials of the service in preparation for
operational trials with major business customers. If the test trials are
successful, and if we determine to seek and deploy the additional capital
resources to pursue this opportunity and the networks are developed, the 10 GHz
license would further facilitate the development of our local access reach to
businesses.
BUSINESS PRODUCTS AND SERVICES.
- SIMPLE "ACCESS" SERVICES that connect the customer to us for inbound and
outbound voice and data calls. These access services include traditional
analog Business Exchange Lines (BELs) and Digital Business Exchange Lines
(DELs). DEL services include Basis Rate Access, also known as "ISDN2",
and Primary Rate Access, also known as "ISDN30". These and other direct
and indirect access services are priced
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competitively and offered in competition with a number of other direct
and indirect suppliers.
- MANAGED VOICE SERVICES which are best illustrated by our Central Exchange
"Centrex" service. This service presents the customer with business
exchange lines configured as a "virtual PABX", as we completely handle
the services normally associated with a traditional PABX (or PBX). The
success of this product is well demonstrated in the East Midlands where
eight of the 11 local government organizations use NTL Centrex as their
main business service, including the Nottingham City council with more
than 3,500 lines.
- MANAGED DATA SERVICES include fixed point-to-point private circuits at
speeds from 64 Kbps, through multiples of that speed and individually
tailored 100 Mbps and 155 Mbps services. Other services include the
provision of intersite data services with particular transmission
protocols, such as Internet Protocol also known as TCP/ IP, Frame Relay
and ATM.
- INTERNET SERVICES provided by NTL range from "Dial-up" customers to
dedicated private circuits for greater access speeds. We are launching a
range of new services and branded hardware products, which include both
entry level and advanced "firewalls", and a self provisioning web-hosting
service. We own an interest in and provide communications network and
back office support for VirginNet and provide services to more than
twenty other Internet Service Providers.
LOCAL BUSINESS SERVICES. The local business telecoms market provides an
attractive opportunity to NTL. For the most part, the underlying capital
investment needed to address this market is made through the buildout of the
network for the residential market in our franchised areas.
REGIONAL BUSINESS SERVICES. The communications services we provide to the
education and government sectors is an excellent example of the possibilities
created by our newly built high bandwidth networks where we can provide both
region wide and intra-regional connectivity. We provide extensive services to
numerous local governments, particularly our Centrex service that eliminates the
need for a PBX, simplifies moves, adds and changes and provides free calling
between locations. Additionally, our focus on the education market is
demonstrated by the more than 3,000 primary schools, colleges and universities
we serve; the majority of which we connect to the internet with speeds ranging
from 128 Kbps to 2 Mbps. Funding for the internet segment of the services has
been largely provided by the government, for whom internet connectivity has
become a high priority.
REGION-WIDE BUSINESS SERVICES. In Hertfordshire, NTL provides county-wide
telecommunications for all the local schools as well as widely dispersed
municipal administrative offices. We were awarded all of Hertfordshire County
Council's voice and data traffic and installed Centrex across all of the
Council's sites (upward of 500 Centrex lines) based upon an integrated solution.
These sites include libraries, social services offices and environmental
services offices all linked to an NTL-provisioned voice and data call center.
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In addition to providing county-wide municipal council service in
Hertfordshire, we provide a customized package of internet and telecom services
to all schools county-wide. The service, known as the "Hertfordshire Learning
Grid", inaugurated one of the largest internet and intranet projects in the UK
education sector. NTL installed, maintains and manages PCs at all primary
schools. NTL arranged to train three teachers in each school on how to use the
internet for communication, i.e. e-mail, how to use the Intranet for their
administration, and how to use the world wide web to gather information which
would support the teachers and help them to teach the children. Additionally,
NTL built a bespoke intranet service for both the council's administration and
schools which entailed a help desk, an e-mail filtering system, internet
filtering, and intranet filtering. The complete solution is fully managed by NTL
and completely seamless to the customer. All queries are managed by their
respective NTL local account manager.
INTRA-REGIONAL BUSINESS SERVICES. Within regions, NTL has overlaid
dedicated high capacity Virtual Private Networks (VPNS) on its previously
constructed intrafrastructure. An excellent example of a VPN is the provision of
155 Mbps metropolitan area networks (MAN) in a number of our regions throughout
the UK to support SuperJANET. The UK Government established the Joint Academic
Network (JANET) in order to facilitate a sharing of knowledge and research among
all UK universities and other government-funded research facilities. SuperJANET
is the broadband, or high speed, portion of JANET. A good example is the
SuperJANET network in South Wales (SWAN). SWAN provides the gateway to
SuperJANET for 23 institutions of higher learning in Wales. SWAN is a 60 mile
fiber network, connecting with 13 sites which serve approximately 16,000 PC's,
creating approximately 2 million e-mails and 12 million hits on the World Wide
Web every month.
NATIONAL BUSINESS SERVICES. Our national network was designed
specifically to connect our local networks and enable distance insensitive
calling tariffs. We estimate that our national network covers approximately
3,500 route miles and 170,000 fiber miles across England, Scotland and Wales.
During 1998, we extended the network to include the first resilient fiber
connection between Northern Ireland, the Republic of Ireland, Scotland and
England. In addition, in December 1998, we acquired EGT which expanded our
network to cover southeast England. Our national network has been designed with
significant excess capacity. For example, the trunk route specification provides
for two large ducts, each with capacity for 4 sub-ducts, only one of those eight
sub-ducts is currently used. Our total duct capacity exceeds 2,300 fibers of
which only a small portion is currently used.
Our national network is a fully redundant, SDH digital fiber network. The
major fiber routes are complemented by microwave radio connections which
increase the reach of the network. SDH technology improves network reliability
and performance and provides greater flexibility than conventional transmission
architecture. In addition, network availability, management and routing are also
superior to conventional transmission architecture because signals are
automatically rerouted to the best path available if another is severed or
degraded. We believe that we have a competitive advantage over other carriers
such as BT because SDH technology has been built into our networks from the
start, thus avoiding integration problems with older network technologies.
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An important source of revenue for NTL is the bandwidth and connectivity we
provide to other communications carriers. Our network is used to interconnect
these carriers to cities throughout the UK and Ireland. NTL provides customers
with bandwidth ranging from 2 Mbps to STM-16's. Owning core infrastructure also
opens up avenues for international network expansion. Increasingly, network
operators are looking at minimizing capital outlay by swapping capacity on their
infrastructure for new nodes or additional capacity elsewhere. Our customers
include fixed wireline and mobile telecommunications operators, cable operators,
internet service providers, and various information technology and facilities
management companies, notably.
- COLT where we have been awarded "preferred supplier" status for the
distribution of COLT's traffic outside the London area. This covers
bandwidths from 2 Mbps to STM-1.
- ENERGIS for which we provide high speed managed services to enable the
operator to more effectively address its "off-net" customer base.
- GLOBAL ONE where as part of this international operator's roll-out, we
are providing managed services between London and Dublin utilizing our
recently completed sub-sea cable.
- VODAFONE AND ORANGE, for which we provide inter-switch capacity on our
national network. During 1998, both Vodafone and Orange considerably
increased their requirements for network services, and as of December
1998, we supplied Orange with the majority of its inter-switch capacity.
CARRIER SERVICES PRODUCTS, AND MARKETING. We expect to continue to
successfully serve this marketplace through our strategy of providing high
quality and competitively priced services. Additionally, we continue to utilize
our specialized ability to provide tailored solutions necessary to serve this
demanding market.
The rapid expansion in voice traffic is expected to continue and we have
entered into interconnect agreements with national and international operators
to both reduce the costs of carriage and termination of our originated traffic
and of termination of other carriers' traffic.
The expected growth in the number of international operators building and
operating submarine cable systems has been substantial and continues to grow
with many of these cables transiting the UK. We have considerably increased
physical connectivity to UK international cable landing stations and products
have been successfully developed to address the needs of these international
cable operators for backhaul services between the cable landing sites and the
major UK international nodes such as Telehouse, London.
We believe the UK market for wholesale data services is significant and
growing rapidly due to the fast growth in IP, internet and other data traffic.
Utilizing our state of the art ATM network, we have developed Frame Relay and
ATM wholesale products to address this increasing demand for high speed data
connectivity. Additionally, utilizing our core data network, local loop
infrastructure and connectivity to the main international UK nodes will allow us
to address the needs of international operators for the termination/origination
of UK bound/generated data traffic.
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In addition to telecoms and data services we also offer wholesale internet
access solutions including network services, call center operations, customer
provisioning and billing to UK Internet Service Providers ("ISPs") and other
corporate customers that would like to expand their internet presence. This
service was launched in 1995 as our first national product offering.
In 1996, we established the VirginNet joint venture with Virgin
Communications Limited. The joint venture is 49% owned by us and 51% by Virgin.
VirginNet offers connectivity and proprietary content services to consumers and
small businesses throughout the UK. VirginNet recently launched a "free access"
product offering, whereby customers only pay for the minutes that they are
online or in contact with a customer care representative. We are able to support
this service profitably because we carry the majority of the VirginNet internet
traffic on our owned network facilities.
By integrating our internet infrastructure with our national telecoms
network we have been able to decrease the costs of providing these wholesale
services as well as increase the value of the proposition by retaining a higher
portion of the revenue from the data traffic that our customers generate. We
plan to continue to enhance our internet network, both nationally and
internationally, to accommodate the growth in the business.
Our carrier services product portfolio also includes a comprehensive range
of satellite services for media and broadcast customers who need to distribute
programming around the globe either occasionally or full time. We enable TV
broadcasters with full time channels to transmit their programming from their
playout or production center, using a fiber link, to one of our three satellite
teleports. This is then beamed up to the satellite, which in turn re-transmits
the programming towards earth for reception by viewers.
Our teleports are connected by fiber and radio circuits and provide
uplinking services to UK cable television programme suppliers. At our main site
near Winchester, UK, we have antennas up to 40 feet in diameter. The site is
linked to our two London teleports through our own national broadband network.
Together they form an interconnected virtual teleport offering nonstop
resilience.
Through these teleports we have access to all the main satellites orbiting
Earth including Astra, Eutelsat, Intelsat, Orion, and PanAmSat.
The ultimate end users for our full-time services include households
receiving a television channel in their own home, or other program distributors
such as cable companies who pass the signal onto their end users. Our major
fixed service customers include Turner Broadcasting Systems, Flextech, the BBC
and QVC.
To cover live news coverage and sporting events, we operate a fleet of
satellite news gathering trucks. Our global capability and infrastructure means
we can respond rapidly to consumer demand. In addition, we can now offer
customers the facility to transmit programming between 48 US cities and Europe
by use of a transatlantic fiber link.
BROADCAST AND TOWER SERVICES
We are a leading owner and operator of broadcast, transmission and wireless
communications infrastructure in the UK. As of September 30, 1999, we owned or
shared 1,458 towers and sites in the UK.
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We provide a number of services:
- Television and radio broadcast transmission
- Tower and site leasing
- Radio communications services
Based on our track record of more than 40 years of providing broadcast
services to the UK's independent television operators and our expertise in
digital broadcasting, we believe that we are uniquely positioned to capitalize
on the trends towards privatization and digitalization in the global
broadcasting industry.
UK BROADCAST TRANSMISSION
NTL has been involved in broadcast television since the 1950's when we
designed and built the television transmission system for the UK's first
independent commercial television network. The Broadcast Transmission Group
operates a national infrastructure in the UK of 1,458 owned or shared
transmission sites delivering broadcast signals for the three commercial
national television channels and many of the UK's independent local, regional
and national radio broadcasters. Additionally, the group designs, installs,
operates, and maintains new transmitter networks and has a spectrum planning
service to monitor the coverage of television and radio networks.
The Broadcast Transmission group provides a recurring contracted revenue
stream from these customers through long term contracts. The projected total
value of our present contracts for broadcast services is $1.8 billion with some
contracts extending until 2012. An attractive feature of the NTL broadcast
contracts is our ownership of both towers and transmission equipment responsible
for generating the broadcast signal. In essence, TV and radio station owners are
programmers and NTL is the broadcaster. The nature of these arrangements is such
that there are significant switching costs for any TV broadcaster wishing to
change service provider. The barriers to entry a new provider would need to
overcome include:
- The provisioning of capital equipment for transmission services and
studio coding, decoding and distribution circuits;
- Re-engineering of network either around NTL sites or, more challenging,
around a different set of sites. In the latter case, planning permission
would be particularly difficult to receive for an alternative set of
large transmitter sites;
- Attaining spectrum for a differently engineered network as there is a
broadcast spectrum shortage.
TELEVISION BROADCASTING. We currently provide digital broadcast
transmission for two of the three commercial national television channels in the
UK, ITV and Channel 4/S4C, and analog broadcast transmission services for ITV,
Channel 4/S4C and Channel 5, the third commercial national television channel in
the UK.
In November 1998 we made broadcast history with the launch of the first
commercial digital terrestrial television network. Two of the four recipients of
the digital terrestrial television (DTT) multiplexes, ITV and Channel 4 and SDN
(in which we hold a 33% equity interest) selected us as the supplier of
transmission services. At the launch of DTT
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there were 22 transmitting stations with a rollout plan targeted at reaching 85%
population coverage. As of October 20, 1999, there were 74 transmitting
stations. We have not only successfully completed the first phase of the build
program from playout centers to transmission in a timely fashion but have also
signed 12 year contracts to provide end-to-end service, including studio
compression, transmission and full systems integration. It is anticipated that
the digital network will ultimately grow to match the coverage of the analog
system to enable its switch-off.
Digital broadcast systems require a more complex engineering design than
their analog predecessors. We have exploited this by extending our range of
services to include tower leasing and transmission services (as with analog)
plus "end-to-end" system integration and service ranging from studio playout
centers to terrestrial transmission. This has the twin benefits of enlarging the
total market available from broadcasting and further differentiating us as a
unique provider able to offer towers, transmission and system integration
services for digital television.
RADIO BROADCASTING. The broadcast radio market in the UK comprises the
publicly funded BBC and the commercial radio industry. The BBC operates five
national radio networks and 44 local radio stations. All non-BBC radio in the UK
is regulated by the Radio Authority, who currently licence 3 national commercial
stations (such as Virgin and Classic FM) and 220 metropolitan, regional and
local stations. Despite this diversity, ownership concentration is high, with 5
or 6 major groups controlling the majority of stations.
Commercial radio stations are free to contract with any supplier for their
transmission needs. We have an 85% share by value of the local commercial radio
transmission market and a 40% share by value of the national commercial market.
We also offer a range of services to local and national radio broadcasting
licensees in the UK including: target service area planning; site location,
installation and construction; and equipment selection, procurement, operation,
monitoring and maintenance. This division offers total broadcast contract
services, where it designs, builds, owns and maintains the operator's
transmission facilities, and facility management contract services where it
maintains customer-owned equipment and administers the operation of the
transmission service.
The migration to a new digital transmission platform will create
significant growth in the broadcast radio transmission market. The Radio
Authority is committed to a fast roll-out of the new digital multiplex licenses
and has already awarded the only national licence to Digital One, of which we
are a founding equity partner with a 33% equity interest. We have a contract for
the transmission of Digital One with a lifetime value in excess of $75.0
million. A total of 26 licenses for regional and local digital radio will be
awarded between 1999 and 2001, and we are well positioned to win transmission
contracts for a portion of the licenses, and provide site leasing services
associated with some of the remaining licenses.
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THE TOWER AND SITES DIVISION
We rent antenna space on our owned and leased towers and sites to a variety
of carriers operating cellular, PCS, Specialized Mobile Radio ("SMR"), Enhanced
Specialized Mobile Radio ("ESMR"), paging and other wireless networks. We
typically receive fees for installing customer's equipment and antennas on a
tower and also receive rental payments from customers payable under site leases.
As of June 30, 1999, over 300 companies rented antenna space on our towers and
sites. These site rental agreements have terms which are typically 10 years in
length (and renewable), and are generally subject to price indexation with
inflation. Site sharing customers are typically billed a year in advance. During
the last 4 years, the number of lessees on our towers has grown from 1,989 to
over 4,000.
The cellular market is the largest of these markets in terms of users,
coverage, and usage of radio sites, and is witnessing extraordinary growth.
Current build plans of UK cellular operators would indicate a doubling of the
number of base stations built to meet the increased demand over the next 3
years.
Cellular growth will necessitate reliable communications infrastructure in
all commercial areas, leading to a requirement for good cellular coverage inside
buildings. We believe this creates a new type of radio site, which unlike towers
will exist within commercial buildings, transport hubs, shopping malls and other
large buildings. Our initial analysis shows that there are approximately 2,000
large retail, transport or other multi-tenanted commercial properties in the UK
that may require communications infrastructure to facilitate mobile telephony.
To this end we have won the exclusive contract to provide this service inside
Bluewater, Britain's largest and newest shopping complex.
Against the backdrop of projected demand for suitable radio sites, the UK
planning/regulatory environment is increasingly encouraging site sharing to
prevent proliferation of single-user towers. Intense price competition in the
cellular market is leading to out-sourcing opportunities as the network
operators look to achieve broad and deep coverage without developing significant
single-user tower portfolios.
As of September 30, 1999, we own or share 1,458 towers and sites in the UK.
Our inventory of owned and shared towers and sites was increased substantially
from 1995 to today as a result of the following transactions.
- In 1995, we embarked on a contract to build a network for the UK PCN
operator "one2one." As part of this contract, we acquired approximately
240 cellular sites, with one2one as anchor tenant.
- In May 1998, we purchased 114 sites from Simoco Group. This portfolio was
originally developed as part of the Phillips PMR business, the sites
being strategically located across the UK in hilltop locations ideally
suited to PMR VHF systems.
- In December 1998, we acquired 126 sites as part of the purchase of all of
the business and assets of EGT. This transaction included the right to
develop up to 1,000 more locations of Eastern Group property for site
sharing purposes. Overall,
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we believe that this portfolio has been developed for good cellular
telephone coverage.
RADIO COMMUNICATION SERVICES
Our RadioComms division is involved in mobile communications maintenance,
support and facilities management. This enables us to offer customers the
optimum solution to their requirements, from equipment specific component
repair/replacement, to full turnkey site and equipment maintenance.
The group offers a full range of services, including the operation of radio
networks and the provision of support and maintenance services to customers with
"mission critical" radio communications needs. We serve a substantial portion of
the radio installation and maintenance market for public safety services within
England and Wales and associated customers such as HM Prison Service and HM
Coast Guard. These customers provide us with a steady source of revenues, and
have also proven to be very effective references for other services and
products.
We intend to secure further customers and contracts, expanding from
facilities and maintenance activities into complete outsource arrangements. We
have positioned ourselves to effectively compete in the major growth sector in
the radio communications market over the next five years by targeting both
public and private mobile operators. Several large contracts of this type are
subject to bid processes in 1999, with contract awards expected within a year.
Long-term contracts (typically greater than five years) of this nature, if
awarded to us, are expected to substantially increase the revenue profile of the
group and help us maintain our overall revenue stability. There can be no
assurance that such contracts will be awarded to us.
KEY TRENDS IN THE TOWERS AND SITES MARKETS
There are a number of key market trends that are creating opportunities for
us to expand and grow our Broadcast Transmission and Tower Services businesses:
- Digital terrestrial broadcast services will gradually replace their
analog predecessors, resulting in major new services with operators
running in parallel and in competition with existing analog services. The
launch of digital terrestrial television services will ultimately require
the creation of an entire national broadcast network of approximately
1,200 sites to serve the UK population.
- The increasing global trend towards private rather than state ownership
and operation of television and radio broadcast transmission networks.
The outsourcing of these networks will result in new business
opportunities for us.
- The continuation of the rapid growth of cellular mobile telephony in the
UK with greater than 60% annual growth in subscribers for current
services. According to published reports, mobile subscribers have grown
from 9.9 million in August 1998 to 17.5 million in August 1999, or
approximately 29.7% of the population of the UK. The rapid growth in
mobile subscribers has increased demand for antenna space and tower
sites.
- The rollout of new wireless communications technologies, such as PCN and
digital Terrestrial Trunked Radio (known as TETRA) and granting of five
licenses in the
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UK for 3rd generation Universal Mobile Telephone Service (known as UMTS
mobile) in early 2000 will further enhance demand for antenna space and
tower sites.
- The continuing liberalization of the telecommunications market, causing
proliferation of radio fixed links as the most economic and quickest
method of establishing competition within the local loop. These links
will be driven by competition for local loop traffic, high bandwidth WANs
and core network for newly licensed PTOs. This will also enhance the
demand for antenna space and tower sites.
- The growing utilization of wireless delivery to the commercial market in
order to extend bandwidth to all possible locations. There is a
developing market for wireless delivery where fiber is not currently
available or practical to be delivered.
NTL CORPORATE STRUCTURE
NTL is a holding company and conducts its operations through direct and
indirect wholly owned subsidiaries, principally NTL Group Limited, National
Transcommunications Limited and Cablelink Limited, in each of which NTL
indirectly owns 100% of the issued and outstanding capital stock.
NTL Group Limited
Our operations in the United Kingdom relating to our residential services
business, and certain of our business telecom operations, are conducted through
NTL Group Limited, either for itself, or as agent on behalf of certain other of
our subsidiaries in United Kingdom. As of January 1, 2000, NTL Group Limited had
issued and outstanding 5,179,680 fully paid New Ordinary Shares, par value $0.20
per share and 5,179,793 fully paid Ordinary Shares, par value L0.10 per share.
NTL Group Limited did not pay dividends for the fiscal year ended December 31,
1999. The registered office of NTL Group Limited is NTL House, Bartley Wood
Business Park, Hook, Hampshire RG27 9XA, United Kingdom.
National Transcommunications Limited
Our worldwide broadcasting and telecommunications transmission operations
are principally conducted through National Transcommunications Limited. As of
January 1, 2000, National Transcommunications Limited had issued and outstanding
30,000,101 fully paid ordinary shares par value L1.00 per share. National
Transcommunications Limited did not pay dividends for the fiscal year ended
December 31, 1999. The registered office of National Transcommunications Limited
is NTL House, Bartley Wood Business Park, Hook, Hampshire RG27 9XA, United
Kingdom.
Cablelink Limited
Our cable television operations in the Republic of Ireland are conducted by
Cablelink Limited. As of January 1, 2000, Cablelink Limited had issued and
outstanding 86,980 ordinary shares, par value 1 Irish punt per ordinary share.
Cablelink Limited did not pay dividends for the fiscal year ended December 31,
1999. The registered office of Cablelink Limited is 10 Pembroke Place,
Ballsbridge, Dublin 4, Ireland. For the year ended
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December 31, 1999, Cablelink Limited did not contribute more than 10% of the
consolidated revenues of NTL Communications Corp.
COMPETITION
We face significant competition from established and new competitors in the
areas of residential telephony, business telecommunications services, Internet
and cable television. We believe that competition will intensify in each of
these business areas, particularly business telecommunications and internet.
Residential Services. We compete primarily with BT in providing telephone
services to residential customers. BT occupies an established market position
and manages fully built networks and resources substantially greater than ours.
According to OFTEL, at March 31, 1998, BT serviced nearly 87% of UK residential
telephone exchange line customers. Our growth in telecommunications services,
therefore, depends upon our ability to convince BT's customers to switch to our
telecommunications services. We believe that value for money is currently one of
the most important factors influencing the decision of UK customers to switch
from BT to a competitive telecommunications service. BT has, however, introduced
price reductions in some categories of calls and, due to regulatory price
controls, BT will be making further reductions in its telecommunications prices.
Accordingly, although we intend to remain competitive, in the future we may be
unable to offer residential telephone services at rates lower than those offered
by BT. In such case, we may not achieve desired penetration rates and may
experience a decline in total revenues. There can be no assurance that any such
decline in revenues or penetration rates will not adversely affect us. In
addition to BT, other telecommunications competitors could prevent us from
increasing our share of the residential telecommunications market. In
particular, BT is under a regulatory obligation to introduce carrier
pre-selection on its network, which it expects to do in the second half of 2000.
Carrier pre-selection may increase the appeal of indirect access operators,
whose discounted call charges may undercut us.
We also compete with mobile networks. This technology may grow to become a
competitive threat to our networks, particularly if call charges are reduced
further on the mobile networks. Our radio communications group may enable us to
benefit from the growth in this technology. There can be no assurance, however,
that we will be able to compete successfully with such telecommunications
operators.
We believe that we have a competitive advantage in the residential market
because we offer integrated telephone, cable television, telecommunications
services (including internet, interactive and on-line services) and
multi-product packages designed to encourage customers to subscribe to multiple
services. However, there can be no assurance that this competitive advantage
will continue. Indeed, BT and all other operators will be permitted to provide
and convey cable television services throughout the UK starting January 1, 2001.
In addition, all areas currently without franchises will open to general
competition in the future, and exclusive franchises will no longer be awarded.
British Sky Broadcasting Limited currently markets telecommunications
services on an indirect access basis (which requires the customer to dial
additional digits before entering
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the primary telephone number, thus diverting calls onto another operator's
network). In addition, BSkyB has proposed a joint venture with BT, Midland Bank
and Matsushita that is known as Open (formerly British Interactive
Broadcasting). If Open's bid to enter the interactive digital services market
passes review by the competition directorate of the European Commission, we
believe that the resulting combination would provide significant competition.
Our cable television systems compete with direct reception over-the-air
broadcast television, DTH satellite services and satellite master antenna
systems. In addition, pay television and pay-per-view services offered by us
compete to varying degrees with other communications and entertainment media,
including home video, cinema exhibition of feature films, live theater and newly
emerging multimedia services. We expect that, in the future, we may face
competition from programming provided by video-on-demand services, including
those that may be provided by PTOs with national licenses. In addition, there
will be general licensing to provide cable television services, including in our
franchise areas, from January 1, 2001. Should any additional operators,
including BT choose to construct or adopt networks to provide cable television
in these areas, it could have a material adverse effect on us.
BSkyB and OnDigital have recently dropped the practice of charging any
upfront fee for digital set-top boxes, although they still charge in some
instances for installation. Coupled with BSkyB's move to bundle free internet
access and discounted indirect access telephony (with calls priced at 40% below
BT headline rates), these moves have reduced the competitive advantages
previously represented by our offerings.
We believe that the underlying technological advantages of our networks
will allow us to respond to such moves by our competitors. Nevertheless, there
can be no assurances that we will be able to continue to compete successfully in
all segments of the residential markets.
Business Telecommunications. BT is also our principal competitor in
providing business telecommunications services. In addition, we compete with
Cable & Wireless Communications, Energis Communications Limited, Thus in
Scotland and with other companies that have been granted telecommunications
licenses such as MCI-WorldCom and Colt. In the future, we may compete with
additional entrants to the business telecommunications market. Competition is
based on price, range and quality of services, and we expect price competition
to intensify if existing and other new market entrants compete aggressively.
Most of these competitors have substantial resources and there can be no
assurance that these or other competitors will not expand their businesses in
our existing markets or that we will be able to continue to compete successfully
with such competitors in the business telecommunications market.
On September 29, 1993, the ITC issued a statement pursuant to which it took
the position (shared by OFTEL and DTI) that BT and the other national PTOs may
provide video-on-demand services under their existing licenses. No assurance can
be given that video-on-demand will not provide substantial competition to us
within our markets in the future.
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Broadcast Transmission and Tower Services. Castle Transmission Ltd, a
subsidiary of Crown Castle, Inc., is NTL's primary competition in the
terrestrial broadcast transmission market in the United Kingdom. Castle provides
analog transmission services to the BBC. It also has been awarded the
transmission contract for the new DTT multiplex service for the BBC and
OnDigital. Castle has diversified from its core television broadcasting business
using its transmission infrastructure to enter into the radio transmission and
telecommunications sectors.
Although Castle is our direct competitor, we each have reciprocal rights to
use each others' sites for broadcast transmission usage in order to enable each
of us to achieve the necessary country-wide coverage. This relationship is
formalized by the site-sharing agreement entered into in 1991 when those towers
were privatized.
Castle also offers site rental on a significant number of its sites (some
of which are managed on behalf of third parties). Like us, Castle offers a full
range of site-related services to its customers, including installation and
maintenance. We believe our towers to be at least as well situated as Castle's
and that we will be able to continue expanding our own third-party site-sharing
penetration.
All four UK mobile operators own site infrastructure and lease space to
other users. Their openness to sharing with direct competitors varies by
operator. Cellnet and Vodafone have agreed to cut site costs by jointly
developing and acquiring sites in the Scottish Highlands. BT and Cable &
Wireless Communications are both major site-sharing customers but also compete
by leasing their own sites to third parties. BT's position in the market is even
larger when considered in combination with its interest in Cellnet.
Several other companies compete in the market for site rental. These
include British Gas, Racal Network Systems, Aerial Sites Plc, Relcom Aerial
Services and the Royal Automobile Club. Some companies own sites initially
developed for their own networks, while others are developing sites specifically
to exploit this market.
We face competition from a large number of companies in the provision of
network services. The companies include CTL, speciality consultants and
equipment manufacturers such as Nortel and Ericsson.
REGULATION
Cable television and cable telephone service industries in the UK are
governed by legislation under the Telecommunications Act 1984, the Broadcasting
Act 1990, and the Broadcasting Act 1996. The operator of a cable television and
cable telephone franchise in the UK covering more than 1,000 homes requires the
following two principal licenses for each franchise area:
- a telecommunications license, granted under the Telecommunications
Act by the Secretary of State and supervised by the DTI and OFTEL, which
authorizes the installation and operation of the telecommunications network
used to provide cable television and cable telephone services.
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- a cable television license, which authorizes the provision of
broadcasting services within a defined geographical area and which may be
either:
(1) a Prescribed Diffusion Service License ("PDSL"), granted
prior to 1991, which allows an operator to provide cable television and
other entertainment services by means of a cable network, or
(2) an LDL, granted since January 1, 1991 under the Broadcasting
Act 1990, which allows an operator to deliver television and other
programming services by means of a licensed telecommunications network
including a cable network.
Each type of license described above contains various conditions, and in
the event of the breach of such conditions, the Director General or the ITC, as
appropriate, could issue an enforcement order and ultimately commence
proceedings to require compliance or to revoke such licenses.
Under the Broadcasting Act 1990, cable operators may elect to replace
certain PDSLs with LDLs with similar terms.
The regulatory environment in the UK has generally encouraged the
development of the cable telecommunications and the cable television industry
by, among other things, licensing only one operator for each cable franchise
area and restricting the national PTOs from using existing telecommunications
networks to carry broadcast entertainment.
On April 23, 1998, the Department of Trade and Industry announced the UK
government's intention to progressively end this policy, allowing any operator
to seek a license to compete in the provision of broadcast entertainment in
those areas outside current cable franchises. From January 1, 2001, competition
within current cable franchises will also be permitted.
CABLE TELEVISION
The Broadcasting Act 1990
The Broadcasting Act 1990 established the ITC to license and regulate
commercial television services (terrestrial, cable and satellite) and the Radio
Authority to regulate radio services. The ITC's functions are, among other
things, to grant licenses for television broadcasting activities and to regulate
the commercial television sector by issuing codes on programming, advertising
and sponsorship, monitoring programming content and enforcing compliance with
the Broadcasting Act and cable television license conditions. The ITC has the
power to vary cable television licenses and impose fines and revoke such
licenses in the event of a breach of the license conditions. The ITC also
enforces ownership restrictions on those who hold or may hold an interest in
licenses issued under the Broadcasting Act. See "-- Cable Television
Licenses -- Ownership Restrictions".
Cable Television Licenses
General. As of December 31, 1998, cable television licenses have been
granted for over 160 franchise areas in the UK. On April 23, 1998, the
Department of Trade and Industry announced the UK Government's intention to
progressively end the policy of granting only one cable television license for a
franchise area. As a result, any operator can
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seek a license to compete in the provision of broadcast entertainment in those
areas outside current cable franchises. From January 1, 2001, competition within
current cable franchises will also be permitted. The ITC also has indicated that
certain areas, for which cable television licenses have yet to be awarded, may
be advertised at the request of applicants. In the past, such licenses (LDLs)
were awarded after competitive bids. However, it is now the government's policy
to grant licenses in new areas to all suitable applicants. Before awarding an
LDL, the ITC must be satisfied as to certain matters, including the technical
specification of the proposed system; that the applicant has sufficient funding
to run the franchise; and that the applicant is a fit and proper person to be
awarded a license.
Cable operators may carry UK licensed broadcast services, foreign satellite
programs or text in their services. Cable television licenses also require cable
operators to ensure that advertising and foreign satellite programs carried by
them as part of their services conform to the restrictions set forth in the
codes on advertising, sponsorship and programming issued by the ITC. Cable
television licenses also impose an obligation on licensees to provide any
information which the ITC may require for purposes of exercising its statutory
functions.
Term, Renewal and Revocation of Cable Television Licenses. We hold 39
PDSLs and 13 LDLs, all for 15-year terms.
An application may be made to the ITC to extend a PDSL for up to an
additional eight years if the cable operator holds a 23-year telecommunications
license. Fees would continue to be payable on the same basis as for the
unextended PDSLs and no Percentage of Qualifying Revenues ("PQR") or cash bids
would be payable during this 8-year term. If we elect to extend the PDSLs, we
will upon expiration of such PDSLs as so extended, be required to apply for a
new LDL under the competitive bid procedures described above. If we elect not to
extend a PDSL, we may apply to the ITC (no earlier than five years prior to the
expiration of the PDSL) for a replacement 15-year LDL, with respect to which it
must agree with the ITC on the amount of the cash bid and PQR payments that will
be payable over the term of the LDL (based on what would have been offered if
the franchise had been offered for competitive bids).
Our PDSLs will currently all expire at varying dates from 2000. We have so
far applied to extend one of our PDSLs. We have not applied for any replacement
LDLs under the procedure outlined above, but will do so at the appropriate time.
In light of the new policy ending all cable franchise exclusivity announced on
April 23, 1998, we have requested that all of our LDLs should be replaced by a
single, non-exclusive, LDL covering all areas of the UK not already exclusively
licensed (including those areas covered by the licenses being replaced). This
will end our exclusivity for these areas one year earlier than would otherwise
have been the case, but brings significant license fee savings. We also
anticipate replacing all of our existing PSDLs in a similar fashion once
exclusivity comes to an end, so rendering the issues set out in the preceding
paragraph largely irrelevant.
The ITC may refuse an application for renewal, but only on limited grounds,
including that the ITC proposes to grant a license in an area different from
that described under the
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existing license or that the applicant is not providing services through the
whole of its franchise area.
The ITC may, after consultation with the DTI and the Director General,
revoke a cable television license if an operator fails to comply with its
conditions or with any direction of the ITC, and the ITC considers revocation to
be in the public interest. The ITC must be notified of changes in control of the
licensee, of changes in directors and of certain other changes in shareholdings
in the licensee. If there is any change in either the nature or characteristics
of an operator that is a corporate entity, or any change in persons controlling
or having an interest in it, the ITC can revoke the license if, as a result, it
would not have awarded the license had the new ownership or control existed at
the time the application for the license originally was considered. The ITC can
also revoke any cable television license in order to enforce restrictions on
ownership contained in the Broadcasting Act 1990 as amended by the Broadcasting
Act 1996 (see below) and can impose fines and shorten the license period of
LDLs. The LDL is transferable with prior ITC consent.
We hold a number of licenses to provide local television program services
under the Broadcasting Act 1990. All of these licenses are for a period of 10
years.
Ownership Restrictions. The ITC has a general duty to ensure that cable
television licenses are held by "fit and proper" persons and may exercise
control over who may hold a license where financial assistance is provided to,
or influence is exercised over, a license holder which may produce results which
it considers adverse to the public interest. The Broadcasting Act 1990 also
contains specific restrictions on the types of entities which may hold cable
television licenses or significant interests therein. Cable television licenses
may not be held by a local authority, an advertising agency, a religious or
political body (or one of its officers), the BBC, Channel 4 or S4C or any entity
controlled by them. Ownership restrictions also apply to ownership of different
licensed services (including local delivery services, television, satellite and
radio services and newspapers), or associates of entities operating such
services. See "-- Media Ownership". While PDSLs in most respects continue to be
regulated under the Broadcasting Act 1990 and the Broadcasting Act 1996 as if
the CBA remained in force, the ownership restrictions for PDSLs and LDLs are
substantially similar.
There is currently no statutory restriction on the number of cable
television licenses which may be held by any one person. However, in October
1998, the ITC indicated that where a merger would lead to a concentration of
ownership of connected homes exceeding 25% of all pay-TV homes, the ITC would
consider possible competition concerns and would consult the OFT.
CABLE TELECOMMUNICATIONS
The Telecommunications Act
The Telecommunications Act provides a licensing and regulatory framework
for telecommunications activities in the UK and established OFTEL under the
Director General as an independent regulatory authority. Telecommunications
policy is overseen by the DTI. The DTI on behalf of the Secretary of State also
has primary licensing authority under the Telecommunications Act, although it
may delegate that authority to the Director General.
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The functions of the Director General are, among other things, to monitor and
enforce compliance with telecommunications license conditions, establish and
administer standards for telecommunications equipment and contractors, and
investigate complaints and exercise certain functions concurrently with other
regulators to promote or ensure competition in telecommunications markets. The
Director General may modify telecommunications licenses either with the
agreement of the licensee following a statutory period of public consultation or
following a report by the MMC. The Director General is also empowered to issue
enforcement orders requiring compliance with telecommunication license
conditions which have been breached (see below).
Telecommunications Licenses
We hold individual franchise telecommunications licenses. A
telecommunications license authorizes a cable operator to install and operate
the physical network used to provide cable television and cable
telecommunications services. It also authorizes the operator to connect its
system to other television and telecommunications systems, including those
operated by the PTOs, the terrestrial broadcasting authorities and satellite
broadcasting systems. Although individual franchise telecommunications licenses
granted to a cable operator are for a particular area, they are not exclusive
and, as a result, a cable telephone operator is subject to competition with
respect to the provision of telephone services from national PTOs such as BT and
CWC and other telephone service providers in its franchise area. There are more
than 200 telecommunication licensed operators in the UK. See
"Competition -- Business Telecommunications" and "-- Competition -- Residential
Telephony". Following the Duopoly Review, the Government has granted a
telecommunications license to any applicant provided the applicant has satisfied
certain requirements, including with respect to financial viability and, in some
cases, service commitments. See "-- Duopoly Review".
A cable operator's telecommunications license contains conditions
regulating the manner in which the licensee operates its telecommunications
system, provides telecommunications services, connects its systems to others and
generally operates its business. A cable operator's telecommunications license
also contains a number of detailed provisions relating to the technical aspects
of the licensed system (e.g., numbering, metering and the use of standard
technical interfaces) and the manner in which the licensee conducts its business
(e.g., publication of certain prices, terms and conditions). In addition, a
cable operator's telecommunications license contains prohibitions on undue
preference and discrimination in providing service. The cable operator's
telecommunications license also requires the licensee to provide any information
which the Director General may require for the purposes of carrying out his
statutory functions. Failure to comply with an enforcement order in respect of a
breach of a telecommunications license condition might give rise to revocation,
an injunction by the Director General or to a third party's right to damages. In
September 1997 OFTEL completed its review of the PTO licenses held by cable
operators to convert them to the standard "slimline" format of non-dominant PTOs
which Mercury's modified license now follows to a large extent. Modifications to
these cable operator's licenses have now been issued and have come into effect.
This has resulted in the deletion of a number of conditions in our individual
franchise telecommunications
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licenses, for example, those relating to the pre-notification of prices and the
prohibition on unfair cross-subsidies, although such conduct may fall within the
fair trading condition.
The telecommunications licenses of BT and Cable & Wireless Communications
now contain a condition, referred to as the fair trading condition, which
prohibits any abuse of their dominant position and any agreement or concerted
practice between the licensee and other entities restricting or distorting
competition in the telecommunications market. This condition has been
incorporated into new telecommunications licenses issued since December 31, 1996
including our telecommunications licenses.
The fees payable for the telecommunications license consist of an initial
fee payable on the grant of the license and annual fees thereafter. The annual
fees are based on a proportion of the costs of the Director General in
exercising his functions under the Telecommunications Act and in certain cases a
proportion of costs of the Monopolies and Mergers Commission incurred in
relation to license modification references under the Telecommunications Act.
A telecommunications license is not transferable. However, certain changes
in ownership of an entity holding a license are allowed, subject to compliance
with a notification requirement.
In August 1999, OFTEL issued a statement setting out a new regime for
telecommunications license fees in the UK, stating that all individual licensees
with a relevant turnover of L5 and above are to pay a renewal fee based on
turnover. Those licensees below the threshold are to pay a fixed fee of L3,000
(new market entrants are also to pay the fixed fee for the first two years after
the grant). Class licensees with Annex II status are to pay a fixed fee. OFTEL
may impose additional fees on individual licensees to cover any unforecast
expenditure.
Network Construction and Service Obligations
Where a cable operator holds a PDSL or an LDL replacing a PDSL (see
"-- Certain Regulatory Matters -- General"), the network construction milestones
are contained in the corresponding telecommunications license and are reviewable
by OFTEL.
Where, on the other hand, a cable operator holds a new LDL which is not a
conversion from a PDSL, the milestones are contained in the LDL and are
reviewable by the ITC.
Each of our individual franchise telecommunications licenses prescribes
milestones which require us to construct our network to pass a specified number
of premises within prescribed time periods. The milestones may be varied by the
Director General if he considers that the variation would enable the licensee to
meet the final milestone more easily. The final milestones can be modified only
following a public consultation period and with the approval of the Director
General. If the milestones prescribed by a telecommunications license are not
met, the Director General may take enforcement action which, if not complied
with, could result in the revocation of such license. Similarly, the LDLs which
we have acquired contain build milestones which may be varied by the ITC.
However, the replacement license which we have requested from the ITC will not
contain any milestones beyond the number of premises which we have already
built, as this license
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will be non-exclusive. Hence, the ITC will have no role in enforcing milestone
requirements after the end of this year.
Where a cable network has been installed, a licensee must provide a cable
television service to anyone who reasonably requests it. A cable operator is not
required to provide telephony services, but where it does so, and achieves a 25%
or more share of the relevant market for such services (as determined by the
Director General) within its licensed area, the licensee may, at the direction
of the Director General, be required to ensure that telephone services are
available to anyone in the licensed area who reasonably requests them. We have
not received any such direction from the Director General.
Under a telecommunications license, the cable operator is subject to and
has the benefit of the Telecommunications Code promulgated under the
Telecommunications Act. The Telecommunications Code provides certain rights and
obligations with respect to installing and maintaining equipment such as ducts,
cables and cabinets on public or private land (including the installation of
equipment on public highways). The activities of cable operators under the
Telecommunications Code are also subject to planning legislation.
Cable operators have the benefit of, and must comply with, the New Roads
and Street Works Act, which provides them with the same rights and
responsibilities with respect to construction on public highways as other public
utilities. The New Roads and Street Works Act standardizes fees for inspections
of construction works by local governmental authorities and standardizes
specifications for reinstatement of property following excavation. As a result,
construction delays previously experienced by cable operators because of
separate and often lengthy negotiations with local governmental entities have
been reduced.
Cable operators are required to post bonds for local authorities in respect
of their obligation to ensure reinstatement of roads and streets in the event
the operators become insolvent, cease to carry on business or have their
telecommunications license terminated. In order to install equipment on private
property cable operators must obtain legal permission from occupiers, property
owners and others.
Term, Renewal and Revocation of Telecommunications Licenses
To date, telecommunications licenses for cable franchises have generally
been granted for periods of 15 or 23 years. All of our individual franchise
telecommunications licenses are valid for an initial period of 23 years,
commencing on the date specified by the Secretary of State (which, in practice,
is the date on which the cable system first becomes operative).
Upon expiration, a telecommunications license cannot be extended and an
application must be made for a new license.
A telecommunications license may be revoked if the licensee fails to pay
the license fees when due, fails to comply with an enforcement order, upon the
occurrence of certain insolvency-related events or if the cable television
license relating to the licensee's system is revoked. A telecommunications
license may also be revoked if, among other things, the licensee fails to give
the required notification to the DTI of changes in shareholdings and changes in
control and agreements affecting control of the licensee, or if the DTI
concludes
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that any such change would be against the interests of national security or the
UK Government's international relations.
Licensing Directive Implementation
On December 31, 1998, the UK Government implemented the EC Licensing
Directive (97/13/EC). The Directive requires that all UK licenses conform to a
number of key conditions and criteria set out in the Directive. All new licenses
would conform to these criteria and the Government announced its intention to
amend all existing licenses by the end of 1998 to ensure that they too were in
conformity with the Directive.
In September 1999, the UK government completed the process of amending all
existing licences to bring them into line with the requirements of the Licensing
Directive, by issuing a Statutory Instrument (SI) under the European Communities
Act 1972. The changes result in the significant expansion of the licence, as
many new conditions which did not previously appear in our licences are now
required to be included for reasons of non-discrimination. However, many of
these are not relevant to us unless there is a specific determination that they
should be applied. At present, the changes that resulted have not substantively
altered the regulatory burden on us. The main new elements faced by us and other
UK operators are:
- new obligations to publish charges, terms and conditions for retail
consumers,
- obligations to offer interconnection to a slightly wider group of
companies (including internet service providers provided they meet
specified criteria),
- a requirement to provide a written contract for services containing
certain specific provisions such as the supply time for initial
connection, and details of any compensation and refund arrangements,
- a requirement to abide by any regulations which the Government might
subsequently make setting out obligations in respect of services to the
disabled,
- stronger obligations to provide information to the regulator, and
- the possible designation of NTL as a provider of universal
telecommunications services (OFTEL has subsequently stated that it will
not apply this provision for the foreseeable future).
Duopoly Review
In 1991, the UK Government concluded in its Duopoly Review that the
termination of the duopoly policy (which permitted only BT and CWC to operate
local, national or international fixed-link networks in the UK to provide public
telephone services) might increase competition and benefit consumers in the UK
telecommunications market. As a result, the UK Government revised its policy and
determined that application for licenses would be considered from any person
seeking to operate new telecommunications networks over fixed links within the
UK. Such licenses normally would be granted subject to the general statutory
duties of the DTI and the Director General to ensure the provision of
telecommunications services, to satisfy all reasonable demands for them and the
ability of a person providing the services to finance their operations.
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The Duopoly Review also recommended specific amendments to license
conditions that are particularly important to cable operators. Until the Duopoly
Review, for a cable operator to provide telephone services it had to enter an
agreement with BT or Cable & Wireless Communications with respect to the terms
and conditions (including price) under which the operator would provide
telephone services, obtain a determination from the Director General that
services could be provided and operate its network as agent for either BT or
Cable & Wireless Communications. Since the Duopoly Review, cable operators have
been permitted to provide all forms of wired telecommunications services in
their own right, including the ability to switch their own traffic. The Duopoly
Review also recommended changes to and further study of arrangements relating to
interconnection, number portability and equal access (discussed below).
As a result of the Duopoly Review, we applied for and received modified
telecommunications licenses to enable us to provide wired telecommunications
services.
Interconnect Arrangements
The ability of cable operators to provide viable voice and other
telecommunications services is dependent on their ability to interconnect
cost-effectively with other PTO's telecommunications networks in order to
complete calls that originate from a customer on their cable network but that
terminate off their network or that originate from a customer off their cable
network and terminate on their network. Since the Duopoly Review, cable
operators with contiguous franchises have been able to connect their networks
without regard to whether they are under common ownership without using the
services of BT or Cable & Wireless Communications.
The Telecommunications (Interconnection) Regulations came into force on
December 31, 1997. These implement the Interconnection Directive (Directive
97/33/EC), which will extend, to a certain extent, the categories of operator in
the UK who will have the right to request interconnection and a reciprocal
obligation to provide it. These rights and obligations may extend to certain
operators who operate under class licenses.
PTOs are required under the telecommunications licenses to enter into
interconnection agreements with other PTOs such as NTL (if requested to do so by
such a PTO), and we have interconnection agreements with BT, Cable & Wireless
Communications, Energis, Global One and ACC. Our agreements with BT and CWC may
be terminated by either party upon two years' notice. Our agreements with
Energis may be terminated by either party on six months' notice. Our agreement
with Global One may be terminated by either party upon one month's notice after
an initial term of one year. If we are unable to negotiate acceptable pricing
terms with BT, Cable & Wireless Communications, Energis or Global One in
connection with any continuation or extension of these agreements or scheduled
reviews of these agreements, we may request that the Director General determine
such terms. In 1995 a House of Lords decision established that it is possible
for a regulated company to challenge in the UK courts a determination by the
Director General of terms of interconnection agreements. The Director General
also has the power to make determinations in respect of certain obligations of
any party under an interconnection agreement.
Until October 1, 1997 OFTEL determined standard interconnect charges. The
first interim charge determination covered the period from April 1, 1995 to
March 31, 1996.
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Interim charges were based on BT's forecast financial statements (on a fully
allocated costs basis). OFTEL has now assessed final charges based on BT's final
financial statements for that period. As a result of these revised charges, we
will receive outgoing interconnect charge rebates, and must pay incoming
termination rebates for periods from April 1, 1995. At the end of 1996, OFTEL
completed another consultation process and published interim charges for the
period from April 1, 1996 to March 31, 1997. OFTEL has issued its determination
of final charges for this period. OFTEL has now determined final charges for the
entire period covered by this policy.
As from October 1, 1997 the twice yearly determination by OFTEL of BT's
network charges has been replaced by a system of network price controls and the
cost base for interconnection charges has been changed from fully allocated
costs to long run incremental costs. After a lengthy consultation period begun
in December 1995, in July 1997 OFTEL issued its final proposals which have been
accepted by BT and the necessary modifications have been incorporated into BT's
license. The new system provides for the application of price controls depending
on the level of competitiveness of the service. Services which are not
competitive are divided into baskets, each basket being subject to a charge cap
of RPI minus X. The July 1997 document determined the value of X for each basket
at 8%. Charges for those services which are expected to become competitive
during the current price control period (August 1997 until the middle of 2001),
will not be included in the network baskets, but will be governed by safeguard
caps of RPI plus 0%. Charges for those services which were expected to become
competitive before August 1997 or which are determined by the Director General
to be competitive during the control period, will be free of network controls.
The July 1997 document also sets out the starting charges for the services in
the network baskets which are based on BT's long run incremental costs. The new
system which commenced from October 1, 1997 will run for four years.
In November 1997 OFTEL published non-legally binding guidelines on the
structure and operation of the new network charge control arrangements and on
OFTEL's approach to complaints about charges and other interconnect terms and
conditions. In respect of complaints that BT's charges are unreasonable, OFTEL
will first test whether the charge falls between a cost floor and ceiling
determined by BT using a methodology prescribed by OFTEL and designed to
indicate whether the charge may be anti-competitive. Floors and ceilings for all
non-competitive services will be published each year by BT as part of their long
run incremental costs financial statements.
In April 1999, OFTEL published a document entitled 'Rights and Obligations
to Interconnect Under the EC Interconnection Directive'. The directive requires
that member states nominate companies which are eligible for wholesale
interconnection under the terms and conditions laid out in Annex 2 of the
directive. It was confirmed by the DTI that we would have 'Annex 2' status and
thus would continue to be eligible for wholesale interconnection from BT and
other UK operators. We would, however, have obligations to provide wholesale
interconnect to a slightly wider group of operators than before, including
internet service providers who meet specific criteria.
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Number Translation Services
In March 1999, OFTEL issued a statement on the interconnect and retail
pricing regime for 'Number Translation Services' -- freephone, national rate and
local rate numbers, the latter of which are used in the UK by many operators to
connect dial-up internet services.
The OFTEL document stated that its existing formula for dividing the
revenue generated by such calls between the originating network and the
terminating network -- which some operators had argued allocated too much
revenue to the terminating network -- would remain in place until the next
retail price control review in 2001. OFTEL would, however, be exploring ways in
which greater competition in this market could be encouraged through the
creation of additional retail price points for NTS services. We believe that the
effect on us of OFTEL's decision is likely to be neutral given that its
origination of internet call traffic is now being balanced by substantial
internet termination revenues.
Price Regulation
Although to date we have for the most part been able to price our cable
telephone call charges below those of BT, there can be no assurance that we will
be able to continue to do so in the future. BT currently is subject to controls
over the prices it may charge customers, including a requirement that the
overall basket of charges may not be changed by more than an amount equal to the
percentage change in the RPI less X (and BT may, as a result, have to decrease
prices). In particular, BT may not increase charges for certain services by more
than the amount of the percentage change in the RPI.
OFTEL's latest proposals for control of BT's retail prices have been
incorporated in BT's license. The retail price controls will continue until
2001. The controls will only be put in place where consumer protection is
required, that is, for low to medium-spending residential customers and small
businesses. The current price cap is RPI minus 4.5% on the narrower basket of
services described above. Safeguard caps of RPI plus 0% have been imposed on
certain services. See "-- Competition -- Residential Telephony".
BT has limited opportunity for differential pricing to the same class of
customer because it is subject to prohibitions on undue preference and undue
discrimination across the UK. Following the Duopoly Review, BT's
telecommunications license was modified to permit it to offer discounts to high
volume users, subject to several conditions. However, BT may not offer
discounted services in local markets without offering the discounts nationally
if such discounts result in undue discrimination or unfair cross-subsidy.
In Autumn 1999, OFTEL began the process of examining what price controls,
if any, should apply to BT after 2001. At this stage it is too early to say what
controls will apply, although OFTEL has indicated that where competition to BT
is considered effective, controls may be relaxed.
We are not subject to equivalent scrutiny and control by OFTEL of our
retail telephone prices, given our non-dominant status in the market. We, as
well as other PTO operators, are required to publish our standard prices, terms
and conditions.
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Indirect and Equal Access ("Carrier Pre-Selection")
Indirect access is access to a customer through another operator. Equal
access means preselection by the customer of the indirect access operator or
dialing parity, where the number of digits dialed for calls over the first
(access) network is the same as for calls over the second (indirect) network. In
July 1996, OFTEL released a statement setting out its policy on indirect and
equal access, dealing with the continued provision by BT of indirect access to
CWC and other operators, the possible extension of the obligation imposed on BT
to include equal access, and the possible extension of an indirect access
obligation to Cable & Wireless Communications and other "non-dominant"
operators.
The OFTEL statement concludes that indirect access will remain an important
route for many customers who are not yet able to take advantage of competition
in direct connections to receive the benefits of competitive provision of
telecommunication services. It also states that, given BT's continuing dominant
position in the direct access network, BT should continue to be obligated to
provide indirect access to other operators. However, OFTEL also concluded that
this obligation on BT should not extend to providing equal access to other
operators. OFTEL, having commissioned a cost benefit analysis, concluded that,
rather than a cost benefit, there would be a significant net cost in
implementing equal access. Further, OFTEL concluded that "non-dominant"
operators (such as Cable & Wireless Communications and the cable operators)
should not be required to give indirect access to other operators. Although all
PTO licenses include a condition regarding the provision of indirect access, it
is subject to a number of tests including the need to ensure that the
requirements of fair competition are satisfied and that indirect access, in all
the circumstances, is reasonably required. OFTEL considered that these tests
were not satisfied. However, OFTEL stated that it considers the "well
established" operator threshold of 25% of customer connections in a relevant
market to be a useful guide in determining whether a "non-dominant" operator
should, in the future, be required to grant indirect access to other operators.
OFTEL stated that this threshold would not automatically mean that the operator
would be required to grant indirect access, but that OFTEL would investigate the
issue further in respect of that operator and market conditions generally once
that threshold was reached. On December 1, 1997 the EC Council of
Telecommunications Ministers reached political agreement on a draft directive to
amend the Interconnection Directive (Directive 97/33/EC) with regard to number
portability and carrier pre-selection. This will require member states (except
those which have been granted a derogation under the Full Competition Directive
(Dir 96/19/EC)) to introduce carrier pre-selection by January 1, 2000, for
operators designated as having "Significant Market Power" as defined in the
Interconnection Directive. OFTEL has concluded that BT and Kingston
Communication should be so designated in the United Kingdom. Member states may
request a deferment of this obligation if they can show that it would impose "an
excessive burden on certain organizations or classes of organization". It is
anticipated that some form of carrier pre-selection will be available on BT's
network on or shortly after 1 January 2000.
Number Portability
Telephone subscribers changing their telephone service to a cable operator
have historically had to change their telephone numbers. As a result certain
customers have been
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reluctant to switch carriers because they would lose their existing telephone
numbers. In response to this, we have provided our business customers with the
opportunity to use our telephone service for their outgoing telephone calls,
which generally carry higher revenues than incoming calls, and for their
specialized telecommunications needs, while retaining their existing service
provider (and their existing telephone number) for incoming telephone calls.
In January 1994, the Director General announced that OFTEL was working on
directives to require BT to introduce number portability for the cable operators
who had provided OFTEL with the necessary information as to where and when they
could provide portability to BT. The Director General's statement indicated that
number portability may be introduced in the geographic areas where it is
technically feasible in the foreseeable future. BT rejected a framework proposed
by OFTEL for determining the charges payable for number portability in the event
of a dispute between BT and other operators. In April 1995, the Director General
referred the matter to the MMC to establish whether the failure of BT to reach
agreements with other operators on the commercial terms and conditions for
number portability was against the public interest, and if so, whether the
adverse effects could be remedied or prevented by modifications to the
conditions of BT's telecommunications license. On December 14, 1995, the
Director General announced the MMC's conclusions, including that the absence of
number portability operated against the public interest, that the absence of
number portability was an obstacle to operators' (including cable operators)
ability to win customers from BT, that the introduction of number portability
will strengthen competition, and that BT's telecommunications license should be
modified (following a statutory consultation period) to enable the allocation of
BT's costs incurred in this regard between BT and other operators (including
cable operators), with BT bearing the greater share. The MMC also noted that
there is general agreement in the industry that reciprocity should continue to
be an essential element in the introduction of number portability, and that the
arrangements to be made for allocating portability costs need to take account of
the fact that BT will not always be the exporting operator. BT's
telecommunications license has been modified accordingly.
On April 9, 1997, OFTEL issued a statement which set out OFTEL's proposals
to modify the license conditions of Cable & Wireless Communications and other
fixed operators including cable operators to ensure that they too provide number
portability for all users of fixed phones including portability of specially
tariffed services such as toll-free (0800), premium rate and national rate
services.
Appropriate license modifications were made on December 17, 1997. These
take full account of the MMC report and are based on the current license
condition in BT's PTO license. They also apply the MMC's principles on the
charges which operators can make to each other for providing portability. In
particular, the following principles are applied:
- the licensee would be required to provide portability on request from
another qualifying licensee
- the principle of reciprocity would apply
- each licensee would be required to pay the initial costs of modifying
its network
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- each licensee would be able to pass on to the other licensee
concerned the costs of enabling individual customers to port their numbers
- the exporting licensee would not directly charge the importing
licensee for any additional conveyance costs associated with routing a call
to a ported number
- if requested, the Director General would determine the reasonableness
of the terms and conditions upon which portability was offered.
These license modifications came into effect on December 17, 1997. In
addition, the European Union agreed in 1998 to a revision to the Interconnection
Directive that made it a requirement for Member States to mandate number
portability. An OFTEL consultation of December 1999 suggested that number
portability should be offered as of right to all customers switching between
different operators from January 1, 2000.
Restrictions on National PTOs
The Duopoly Review maintained restrictions upon BT and other national PTOs
from conveying or providing entertainment services (such as the cable television
services currently provided by us) over their national telecommunications
networks. The new Labour government started reviewing the restrictions upon the
conveyance and provision by BT and Cable & Wireless Communications of broadcast
entertainment ahead of the schedule set by the former Conservative government,
which did not intend to review the restrictions on conveyance and on provision
until 2001 although the government was prepared to reconsider the conveying
aspect after March 1998 on the advice of the Director General of
Telecommunications. The Duopoly Review policy did not prevent the national PTOs
from providing cable television services of the kind currently provided by us,
but it did require that such services be provided through separate systems by
separate subsidiaries of the national PTOs under separate licenses similar to
those held by us. This is however no longer the case. The ITC's historical
policy of granting one cable television license for each geographic area ensured
that no national PTO subsidiaries compete with us in the provision of cable
television services in the same area. On April 23, 1998, the Department of Trade
and Industry announced the UK Government's intention to progressively end this
policy, allowing any operator to seek a license to compete in the provision of
broadcast entertainment in those areas outside current cable franchises. From
January 1, 2001, competition within current cable franchises will also be
permitted. Following a consultative document issued in March 1996, the UK
Government announced on June 6, 1996, that it was ending the duopoly between BT
and Cable & Wireless Communications as international carriers from the UK. A
license holder may now provide international services from the UK on
telecommunications facilities owned and controlled by the company providing the
service, and will be able to offer services on any route it chooses. A large
number of international facilities licenses have been granted.
Access to higher bandwidth services
In July 1999, OFTEL issued a consultation document on the arrangements for
access to so-called 'higher bandwidth' services, including fast internet access
and video on demand. The document envisaged a number of possible arrangements
whereby such services could be provided over the BT network, both by BT itself
and by third party
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service providers through some form of unbundling. The document sought views on
whether there was substantial unmet demand for these services, whether this
demand could be met by other means, and, if not, what form of regulatory
intervention might be appropriate to mandate the development of such services
over the BT network. OFTEL emphasized that any such intervention would need to
be consistent with OFTEL's wider policy of encouraging the development of
alternative infrastructure. At the time of writing, it is not known what
conclusions OFTEL has drawn from the responses to the consultation but these are
likely to be influenced by the proposal of the European Commission in the
context of the 1999 review of European telecommunications legislation.
A subsequent OFTEL statement indicated that BT would begin offering
wholesale broadband services in late 1999 in a number of urban areas. In
addition, OFTEL decided to make BT provide a 'full unbundled' local loop option
available to third parties from July 2001 onwards. BT indicated that it would
seek to resist this imposition.
Digital Broadcasting
The Broadcasting Act 1996 introduced provisions for the licensing of
digital terrestrial broadcasting and introduced a "must carry" requirement on
cable companies where both program provider and cable operator use digital
technology to ensure the universal availability of designated public service
channels. Must carry obligations concerning public service channels already
apply to holders of PDSLs.
The Broadcasting Act 1996 distinguishes between "multiplex" providers, the
providers of the frequency ranges on which the television channels will be
carried, and the digital program service providers, who provide the programs to
be broadcast on the multiplexes. Each must be licensed by the ITC. Licensed
digital multiplex providers will be required to contract with licensed digital
program providers to carry their services on the multiplexes on a fair and
non-discriminatory basis.
Initially six multiplexes are available for digital terrestrial television.
Some of the existing terrestrial broadcasters have reserved capacity on these
multiplexes, generally being offered half a multiplex for each existing channel.
This means that the BBC has full control of one multiplex, Channel 3 and Channel
4 have joint control of a multiplex and Channel 5 and S4C each have part of a
third multiplex. Existing terrestrial broadcasters have obligations to simulcast
their existing analog channels and will be able to use their remaining multiplex
capacity to provide new free-to-air or pay services. Following a competitive
tender, the ITC announced in June 1997 that the remaining three multiplexes
would be awarded to OnDigital, a joint venture between Carlton Communications
and Granada Group. BSkyB was also originally a member of the joint venture but
because of competition concerns the ITC required it to divest itself of the
shareholding which was transferred equally to Carlton and Granada. BSkyB however
will remain a major supplier of programming to OnDigital. The licenses were
formally granted by the ITC on December 19, 1997 following conclusion of the
ITC's own discussions with the EC competition authorities regarding their
concerns. The licenses contain conditions which are intended to address, among
other things, concerns over program service contracts with BSkyB. The conditions
include the limitation of program supply agreements to five years, a
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requirement for the licensee to support open technical standards on integrated
TV sets and conditions to ensure that OnDigital is not prevented from competing
with BSkyB.
TV-telephony bundling
The Independent Television Commission and the Office of Telecommunications,
acting jointly, recently issued a consultation paper on the bundling of TV and
telephony services. The paper seeks views on whether such practices might
distort competition in the market for either service separately. The approach
taken in the paper follows established competition law methodology, in which the
relevant market must first be identified, together with an analysis of whether
the party complained of (in this case cable operators) is dominant in that
market. Most independent commentators in the industry believe the market for
television services to be national, and the consultation paper itself records
OFTEL's view that the market for telephony services is national. If this
position results from the consultation, we will not be found to be dominant and
no abuse could be identified in the practice of bundling TV and telephony
services.
FUTURE DEVELOPMENTS
Conditional Access
Pay television broadcasters need to use conditional access systems to
ensure that only subscribers receive their services. Conditional access systems
provide two main types of services: encryption services and customer management
services. The EC Advanced Television Standards Directive (Directive 95/47/EC)
requires, among other things, that conditional access services for digital
television services should be available to broadcasters on a fair, reasonable
and non-discriminatory basis. This Directive was implemented in the UK by the
Advanced Television Services Regulations which came into force on January 7,
1997. In addition to the requirement that conditional access services must be
offered on a fair, reasonable and non-discriminatory basis, the Regulations
provide that broadcasters may obtain information on the conditional access
system prior to its being put on the market. Further, the Regulations provide
that conditional access operators are required to cooperate with cable operators
so that cable operators are able to receive and rebroadcast television services
using their own conditional access system without incurring unnecessary or
unreasonable expense.
The Regulations also modify the Telecommunications Act 1984 to provide for
conditional access systems which make available conditional access services
including encryption, subscriber management or subscriber authorization services
to be treated as telecommunications systems. Each such system must be licensed
and the UK Secretary of State granted a Class License to authorize the running
of these conditional access systems which came into force also on January 7,
1997 and runs until July 31, 2001 unless previously revoked. The license
contains similar provisions to those in the Regulations set out above and, in
addition, includes the fair trading condition.
Under the Class License, the Director General can order a licensee to make
available its intellectual property rights if the licensee is using them to
prevent or obstruct products from being made available. The Director General can
also designate an interface between the licensed system and a broadcaster's
conditional access or other transmission system as an "essential interface" and
thereafter the licensee must comply with any relevant standard
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specified by a broadcaster which includes applicable European standards or other
standards specified by the Director General.
Following public consultation, OFTEL published guidelines on the regulation
of conditional access services for digital television. The guidelines set out
how OFTEL would propose to deal with anti-competitive behavior in relation to
the provision of conditional access services. The guidelines are not legally
binding and are expected to be reviewed where market developments so require.
In July 1997 the DTI and OFTEL issued a joint consultation proposing the
extension of the current conditional access regime for digital television
broadcasts to digital non-television broadcasts and non-broadcast services in
the light of the convergence of the technologies and markets in broadcasting and
telecommunications. The services to be covered include non-broadcast interactive
services such as home-shopping and non-broadcast information services.
Conditional access systems for analog services are not included.
In December 1998, the UK government issued proposals for new license
conditions on 'access control' (conditional access services for non-television
applications) following on from the July 1997 consultation, which it was
intended would be included in all telecommunications licences. Following
representations from operators, the UK Government has now indicated that, rather
than including such conditions in all licences, the conditions will be confined
to a special class licence for access control services, under which any party
wishing to offer such services will be required to operate. As of the date
hereof, the draft of this class licence is not available. A subsequent draft
licence and accompanying guidelines were produced in July 1999. Access control
rules would be applied to where an operator was judged to have either
'dominance' in the relevant market for access control, or 'market influence', a
lesser test of market power invented by OFTEL. The result of a finding of
dominance or market influence would be a requirement not to discriminate on
terms and conditions offered to third parties for access control services, and a
requirement that prices for access control services would be 'fair, reasonable
and non-discriminatory'. Final versions of the licences and guidelines have not
been issued at this time.
In addition, in October 1997, OFTEL issued a consultative document relating
to guidance on the pricing of conditional access systems to ensure that they are
offered on a fair, reasonable and non-discriminatory basis. The aim is to ensure
that prices are reasonable and that comparable broadcasters receive comparable
treatment by not being subject to differential pricing. OFTEL proposes to group
together providers of subscription services and to assess whether they are
comparable by reference to number of subscribers and number of different
services (or combination of services) offered to subscribers.
BSkyB has entered into a joint venture with BT, Midland Bank and Matsushita
(one of the manufacturers of decoders for accessing digital television channels)
known as Open to create and operate a platform for the provision of digital
interactive television services to UK viewers. The interactive services which it
hopes to offer include home banking and home shopping via TV screens. Open also
subsidizes the costs of the manufacture and installation of the decoders needed
to access the services. The joint venture arrangements
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were recently approved by the EU Competition authorities, subject to conditions
which have not yet been published.
Media Ownership
The Broadcasting Act 1996 amends the media ownership rules contained in the
Broadcasting Act 1990. It relaxes the earlier rules limiting ownership between
terrestrial television, satellite and cable broadcasters, except for those
broadcasters which are already more than 20% owned by a newspaper with more than
20% national newspaper circulation. Qualifying broadcasters are therefore now
allowed to have controlling interests in two or more license holders of
terrestrial (analog or digital) cable and satellite television services,
provided that their total interests do not exceed 15% of the total television
market (defined by reference to total audience time calculated by reference to a
designated 12-month period and qualifying cable companies will be able to
control terrestrial television companies, subject to the 15% total television
market limit. Newspaper groups with less than 20% national or local newspaper
circulation are now able to control television broadcasters constituting up to
15% of the total television market, unless the ITC decides that such control
would be against the public interest. Newspaper companies, the license holders
of Channel 3 and Channel 5 and satellite and cable broadcasters, are to have the
ability to control a number of digital terrestrial television licenses, subject
to Prescribed Digital Program Service Points limits, in addition to any analogue
licenses subject to the 15% total audience time limit.
BSM Services
In August 1995 OFTEL issued a consultative document which addressed the
potential development of broadband switched mass-market (also known as BSM)
services in the UK and related regulatory issues. BSM services involve the
delivery of video-quality images over a switched system, at prices intended to
encourage the development of a mass market. The consultative document suggested
that dominant operators (potentially including cable operators) should be
required to provide, on transparent and non-discriminatory terms, broadband
conveyance (including switching) as a network business to service providers
which could have direct commercial relationships with individual customers.
Requirements for accounting separation and the possible need for some form of
price control were also considered. OFTEL suggested that BT is likely, at an
early stage, to be considered a dominant operator, possibly when it starts to
roll out BSM services aimed at covering a significant portion of the UK, either
nationally or in a specific regional market. OFTEL suggested that such
regulation should only be applied to the cable sector when it becomes dominant,
either nationally or in a specific regional market, and is able to compete on
equal terms with BT and any other BSM services distributor. In the meantime the
document recognized the importance of encouraging continuing local investment in
the cable industry's infrastructure. The document also raised the question
whether license obligations on cable operators to provide cable television
services where their systems have been installed should not apply to BSM
services (other than the broadcast entertainment services for which they have
exclusive cable distribution rights in their franchise areas) until they become
dominant in their relevant markets. The stated purpose of the consultative
document was to raise issues in order to stimulate debate to assist in the
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development of the kind of regulatory regime that will best promote the new
services. The August 1995 consultative document was followed by a consultative
document in February 1996 and by a statement by the Director General in June
1996, both of which were concerned with promoting competition in the current
market for services such as on-line information, electronic data interchange and
voice messaging.
Accounting Separation
The EC Interconnection Directive requires that operators who have special
or exclusive rights for the provision of services in sectors other than
telecommunications in the same or another member state must keep separate
accounts of their telecommunications activities if their turnover from the
provision of public telecommunications networks or publicly available
telecommunications services is more than 50 million ecus. This requirement has
been implemented in the UK by the Telecommunications (Interconnection)
Regulations. See "-- Cable Telecommunications -- Interconnect Arrangements".
The DTI and OFTEL take the view that cable operators have special or
exclusive rights for the provision of entertainment services over their cable
systems and therefore fall within this obligation. Several cable operators,
including us, have challenged this interpretation because they are subject to
competition in their franchise areas from DTH satellite service operators and
digital terrestrial television.
The implementing regulations do not set out detailed guidelines for the
accounting separation requirements, but it appears that our individual
franchises do not cross the revenue threshold necessary for these conditions to
become operative.
Separation of Cable and Telecommunications Operations
The EC Commission is of the view that accounting separation provided for
under the existing Cable TV Directive (95/51/EC) is not sufficient to ensure
competition and has introduced an amending directive under its powers in Article
90 of the EC Treaty, relating to the structural separation of operators' cable
television and telecommunications activities. The draft directive was adopted by
the Commission on December 16, 1997 but its provisions do not touch upon our
operations.
Competition Act 1998
The UK Government has enacted the Competition Act which grants concurrent
powers to the industry specific regulators and the Director General of Fair
Trading for the enforcement of prohibitions modeled on Article 81 and 82 of the
European Community Treaty. The Competition Act introduces a prohibition on the
abuse of a dominant position and on anti-competitive agreements, and introduces
third party rights, stronger investigative powers, interim measures and
effective enforcement powers (including fines of up to 10% of UK turnover).
Under the Competition Act, the Director General of Telecommunications is
able, but not required, to exercise concurrent powers with the Director General
of Fair Trading in relation to "commercial activities connected with
telecommunications". The Competition Act enables third parties to bring
enforcement actions directly against telecommunications
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operators who are in breach of the prohibitions and seek damages, rather than
have to wait for the Director General of Telecommunications to make an
enforcement order.
In December 1998, OFTEL issued specific guidance on the application of the
Competition Act in the telecommunications sector. This guidance states that
OFTEL would follow closely the general principles of competition law in its
application of the new prohibitions.
Broadcast and National Telecoms Services
A significant proportion of our total revenues is attributable to the
provisions of television and radio transmission and distribution services and
the provision of telecommunications services. In the UK, the provision of such
services is governed by the Telecommunications Act and The Wireless Telegraphy
Act 1949. Set forth below is a brief summary of the principal licenses of our
National Telecoms and Broadcast Services divisions granted pursuant to these
acts.
Telecommunications Act Licenses
We hold five licenses under the Telecommunications Act (in addition to
Telecommunications Act licenses for its cable franchises).
- Transmission License: a license to run telecommunications systems for
the provision of television and radio transmission services. The Transmission
License enables us to run telecommunications systems for the provision of
television and radio transmission services. It permits us to carry out our core
business of providing transmission services to television and radio
broadcasters. The Transmission License was granted on December 20, 1990 for a
period of 25 years from January 1, 1991. It is subject to revocation thereafter
on 10 years' notice in writing. No notice may be given before the end of the
fifteenth year.
Our Transmission License contains conditions and other provisions which,
among other things:
- require us to provide specified telecommunications services to specified
persons on request
- specify certain criteria to be met by us in providing those services
- require the connection of our telecommunications systems with those of
certain other transmission operators and the transmission over those
systems by such operators of messages for general reception
- require us to publish our charges and terms and conditions of business
and not to show undue preference to or exercise undue discrimination
against particular persons in the provision of certain telecommunications
services
- requires us to hold Wireless Telegraphy Act licenses in respect of each
item of wireless telegraphy comprised in its system
- impose on us an obligation to share our transmission sites with other
transmission operators
- restrict the prices which we are allowed to charge for the provision of
some services
- prohibit us from cross-subsidizing the unregulated side of our business
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- impose a requirement for separate accounts to be produced in relation to
both the regulated and unregulated parts of our business. However, we are
not obliged to do anything "not reasonably practicable."
The Secretary of State may revoke the Transmission License in the
circumstances described under "Telecommunications Licenses -- Term, Renewal and
Revocation of Licenses" above.
- OBS License: a license to run telecommunications systems for the
provision of outside broadcasting services by means of satellite systems. The
OBS License, which permits us to run telecommunications systems for the
provision of outside broadcasting services by means of satellite systems,
enables us to operate satellite up-links from outside broadcast sites (sites
which are not permanently equipped or adapted for television or radio
broadcasting). The OBS License was granted on February 6, 1991 for a period of
25 years from February 7, 1991, thereafter revocable on 10 years' notice in
writing. No notice may be given before the end of the fifteenth year. The OBS
License contains conditions similar to those in the Transmission License. The
OBS License specifies the circumstances in which it may be revoked by the
Secretary of State which include on revocation of the Transmission License.
- Telecoms License: a license to run telecommunications systems. The
Telecoms License enables us to convey messages (including voice and data)
between points on our telecommunications networks. The Telecoms License also
contains conditions and revocation provisions similar to those in the
Transmission License. The Telecoms License was granted on December 30, 1992 for
a period of 10 years from December 30, 1992. Thereafter it is revocable on 5
years' written notice. No notice may be given before the end of the fifth year.
- PTO License: a license to run telecommunications systems. The PTO
License permits us to run telecommunications systems of every description within
the UK and to provide telecommunications services. Both authorizations are
subject to certain exceptions. Our PTO License was granted on February 14, 1996
for a period of 25 years from that date. Thereafter, it is revocable on 10
years' written notice. No notice may be given before the end of the fifteenth
year. Our PTO License also includes a condition obliging it, subject to certain
exceptions, to enter into an agreement to connect its system to the system of
any operator which requires it to do so, provided that operator has been granted
a license authorizing it to connect its system to our system. The PTO License
details the exceptions and conditions subject to which the Telecommunications
Code will apply to us. The Telecommunications Code confers certain important
rights on PTO's in relation to network construction, buildings and land.
- International Facilities License: a license to permit us to provide
direct international facilities based services, without being required to do so
via BT or Cable & Wireless Communications. The license will enable us to take
advantage of the expanding volumes of international telecommunication traffic,
especially data services such as the internet, and substantially reduce our
international call conveyance costs. In this connection, we have been awarded
telecommunications licenses in the Republic of Ireland and in the United States.
As part of the implementation of the Licensing Directive, international
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facilities are no longer separately licensed and the rights under such licenses
have been transferred into the main PTO licenses of those operators, such as us,
who currently have both.
WIRELESS TELEGRAPHY ACT LICENSES
We hold a number of Wireless Telegraphy Act licenses of which the most
important are the following:
- License for the Transmission of Broadcasting Services. This license
was granted on January 1, 1991 and permits us to operate wireless
telegraphy stations at those sites set out in a schedule to the License. In
respect of each station, site and mast heights, power, polarization and
frequency to be used are specified.
- Microwave Fixed Link License. This license permits us to establish
and use fixed stations for sending and receiving wireless telegraphy at
those sites as detailed in the schedule to the license.
- Private Mobile Radio License. This license permits us to establish
sending and receiving stations for wireless telegraphy (both base stations
and mobile stations) and to use these stations for the purpose of sending
and receiving spoken messages concerning our business.
- Earth Station Licenses. We hold a number of earth station licenses.
These licenses permit us to establish earth stations at specified locations
in the UK for the purpose of providing wireless telegraphy up-links between
the earth station and specified geo-stationary satellites.
Each of the four types of license referred to above continue in force from
year to year unless revoked by the Secretary of State or unless any of the
license fees are unpaid by the licensee in which case the relevant license
expires.
Licenses for the Transmission of Broadcasting Services (special
status). We provide transmission services for a large number of radio stations
pursuant to our License for the Transmission of Broadcasting Services dated
January 1, 1991. In respect of two radio stations, Classic FM and Virgin Radio,
we have been issued licenses which are specific for those radio stations. This
has been done for the sake of administrative convenience because, in both cases,
the license fees are paid direct to the Radio Communications Agency by the radio
station concerned.
Radio Fixed Access License. A Radio Fixed Access License has been granted
for services provided at 10 GHz. This license allows us to provide short-range
radio-links between our business customers and our network.
Conditions in the Company's Wireless Telegraphy Act Licenses. Our
Wireless Telegraphy Act licenses contain conditions relating to revocation of
the Licenses and notifications to the Secretary of State. In general, the
Secretary of State may revoke a Wireless Telegraphy Act license at any time.
There are no notification requirements in respect of a change of control. The
license for the transmission of broadcasting services contain provisions which
enable the Secretary of State to revoke the license if, among other things:
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- the licensee is, in the opinion of the Secretary of State, not a fit and
proper body to hold such a license,
- it appears to the Secretary of State requisite or expedient to do so for
purposes connected with the EU or any other international organization or
obligation or co-operation,
- the licensee ceases to hold any contracts for the broadcasting of
television or sound broadcasting services
- the licensee's license granted under the Telecommunications Act is for
any reason revoked.
On June 18, 1998, the new Wireless Telegraphy Act came into force. This
allows the UK's Radiocommunications Agency for the first time to charge more for
spectrum than the costs they incur in allocating it. The Agency has set out its
detailed proposals on how the first wave of "spectrum pricing" will be applied.
This envisages increases in the price which we pay for microwave fixed links
from July 1999. We consider that the increases will not impact significantly on
the business.
The Agency has indicated that the spectrum pricing approach could be
applied in the future (possibly from July 2000 onwards) to other spectrum uses.
In September 1999, the Radiocommunications Agency issued a paper entitled
"Spectrum Pricing: Implementing the Third Stage and Beyond". This sets out
proposals for the possible extension of spectrum pricing to other areas,
including fixed wireless access and, possibly, broadcasting. In relation to
broadcasting, the Agency recognizes that there are significant problems with
applying spectrum pricing, not least uncertainty over the end date for analogue
terrestrial TV and radio broadcasting. A separate consultation will follow in
late 1999.
Price Cap Review
Our regulated business may be divided into two categories: Price Regulated
Business and Applicable Rate Business. Price Regulated Business comprises those
telecommunication services which we are obliged to provide pursuant to its
Transmission License and in respect of which price controls are imposed. Our
Applicable Rate Business comprises those telecommunications services which we
are obliged to provide but which do not fall within the definition of Price
Regulated Business. Charges for Applicable Rate Business are agreed between us
and the relevant customer. If despite all reasonable efforts an agreement cannot
be reached between us and a significant proportion of our customers in respect
of any particular telecommunications service, the charge will be determined by
the Director General.
In respect of any services provided by us which are not Price Regulated
Business or Applicable Rate Business, our prices are wholly unregulated, except
for the overriding duty not to engage in any pricing policy which constitutes
undue preference or undue discrimination against any person or class of persons
in respect of telecommunications services. Our unregulated income would include,
for example, charges for site rentals to PCN operators.
Our Price Regulated Business consists of the television transmission
service provided to the ITV (Channel 3) companies and Channel 4/S4C including
the operation and maintenance of transmission equipment and the provision to
third party transmission
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operators of the accommodation, masts and antennae necessary for the operation
of broadcast transmission services.
On December 24, 1996, the Director General issued the formal modification
to our Telecommunications Act Licenses to effect the price controls which are to
apply to us for the period from January 1, 1997 to December 31, 2002. The Price
Cap Review had two purposes: (1) to establish a new "P0" (allowable revenues for
the first year of the next control period, 1997, in respect of our Maximum Price
Regulated Business) and (2) to establish a new "X" (the percentage by which such
revenues must, after allowing for consumer price inflation, be reduced each year
thereafter). The Director General's review concluded that, on present
assumptions, the new P0 is L53.15 million and the new X is 4.0%.
In addition to price control, the Price Cap Review raised a number of other
issues which will impact upon our Price Regulated Business in the future. In
particular, the Director General suggested that it would be desirable for us to
"unbundle" the prices for operational services and required site rentals which
it charges to each broadcaster (such as Channel 3 and Channel 4/S4C) in the form
of a transmission fee in order to expose those elements of the service which are
potentially competitive and allow broadcasters to choose an alternative supplier
if they wish. OFTEL has proposed to review whether we should publish a ratecard
with a menu of prices for unbundled services in 2002 when our regulated business
is next due for full review. At present, the system for calculating the
proportion of Channel 3's total transmission fee which is charged to each
individual franchisee is based on net advertising revenues ("NAR") accruing to
each franchisee, rather than the costs of actually providing the transmission
service to each of the franchisees.
OFTEL proposed that we should continue to charge Channel 3 as a group a
single price for each component of its transmission service, although each
component would be separately distinguished. This arrangement would continue
unless and until NAR arrangements no longer applied. This decision could only be
taken after agreement with the Department of Culture, Media and Sport and
consultation with other interested bodies.
European Union Legislation
Our business is further regulated by the EU under various European
Commission Directives. In addition, EU law, in particular Directive 94/46,
regulates the provision of satellite services within the EU. In November 1999,
the Commission issued a communication setting out proposals for a new framework
for the regulation of communications networks, including telecoms and
broadcasting networks. The proposals would extend the approach of the existing
'ONP' directives which apply only to telecoms, to broadcast networks and the
internet. The communication sets out proposals for a framework of regulation
which is pro-competitive and which encourages innovation and investment. The
proposals would also strengthen existing regulatory structures by setting a new
European level structure in place allowing for a harmonized approach among
member states. If endorsed by the member states, the communication could result
in legislation which would come into effect around 2003.
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RESEARCH AND DEVELOPMENT
Our research and development activities involve the analysis of
technological developments affecting our cable television, telephone and
telecommunications business, the evaluation of existing services and sales and
marketing techniques and the development of new services and techniques.
PATENTS, COPYRIGHTS AND LICENSES
We do not have any material patents or copyrights nor do we believe that
patents play a material role in our business. We are substantially dependent on
the licenses and franchises granted by the legislative agencies which regulate
our respective businesses. The loss of any one or more of our licenses or
franchises could have a material adverse effect on our business and financial
condition. There are no material intellectual property licenses used by us, the
loss of which would have such an effect.
CUSTOMERS
Except for our broadcast services business, no material part of our
business is dependent upon a single customer or a few customers, the loss of any
one or more of which would have a materially adverse effect on us. The broadcast
services business is, however, substantially dependent on the revenues it
receives pursuant to its contracts with the ITV companies and Channel 4/S4C, the
loss of one or more of which may have a material adverse effect on us.
EMPLOYEES
At September 30, 1999, we had approximately 9,900 employees. Approximately
190 employees are represented by the Broadcasting, Entertainment,
Cinematographic and Theatre Union which has entered into a collective bargaining
agreement with NTLIH. None of our other employees is represented by any labor
organization. We believe that our relationship with our employees is good.
PROPERTIES
We own, lease or occupy under license 29 business units and regional
head-offices throughout the UK, our corporate head-office in Farnborough, and 11
retail shops. In addition, we own or lease approximately 135 switching
centers/head-ends and operational hub-sites together with warehouses and other
non-operational properties, as well as various cable television, telephone and
telecommunications equipment used in each of its regional systems.
We own, lease or occupy under license approximately 770 properties, of
which approximately 700 are used as transmitter sites. In addition, we also are
the lessee or licensee of approximately 600 transmitter sites which are owned by
Castle Transmission and shared between the two organizations pursuant to a site
sharing agreement.
We maintain offices under lease for our corporate staff in New York City.
We believe that our facilities are presently adequate for their current
use. We intend to continue to expand the systems in accordance with the
requirements of the network build
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schedules and acquire new sites as part of the ongoing expansion of our
transmission networks.
LEGAL PROCEEDINGS
We are involved in, or have been involved in, certain disputes and
litigation arising in the ordinary course of business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from the construction of our networks and the maintenance and
servicing of our transmission masts, none of which are expected to have a
material adverse effect on our financial position or results of operations or
cash flows.
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MANAGEMENT
The following are our current directors and executive officers and their
ages as of January 20, 2000. They also hold the same positions with our parent,
NTL Incorporated:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George S. Blumenthal................. 55 Chairman of the Board, Treasurer and Director
J. Barclay Knapp..................... 42 President, Chief Executive Officer and Director
Sidney R. Knafel..................... 69 Director
Ted H. McCourtney.................... 61 Director
Del Mintz............................ 72 Director
Alan J. Patricof..................... 65 Director
Warren Potash........................ 68 Director
Michael S. Willner................... 47 Director
Gregg Gorelick....................... 41 Vice President - Controller
John F. Gregg........................ 35 Senior Vice President - Chief Financial Officer
Richard J. Lubasch................... 53 Executive Vice President - General Counsel and
Secretary
Steven L. Wagner..................... 47 Vice President - Consumer Services
Leigh Costikyan Wood................. 42 Senior Vice President - Chief Operating Officer of UK
Operations
</TABLE>
George S. Blumenthal has been our Chairman, Treasurer and a director since
our formation. Mr. Blumenthal was also our Chief Executive Officer until October
1996. Mr. Blumenthal was President of Blumenthal Securities, Inc. (and its
predecessors), a member firm of The New York Stock Exchange, from 1967 until
1992. Mr. Blumenthal was Chairman, Treasurer and a director of Cellular
Communications, Inc. ("CCI"), which positions he held since CCI's founding in
1981 until its merger in August 1996 into a subsidiary of AirTouch
Communications, Inc. Mr. Blumenthal is also Chairman and a director of CoreComm
Limited, and was Chairman, Treasurer and a director of Cellular Communications
of Puerto Rico, Inc. prior to its acquisition by SBC Communications, Inc. in
1999 (the "CCPR Acquisition") and is a director of Andover Togs, Inc.
J. Barclay Knapp is our President and Chief Executive Officer, as well as a
director. He has held these positions since our formation with the exception
that Mr. Knapp was Chief Operating Officer until October 1996 when he was
appointed Chief Executive Officer and he was Chief Financial Officer until June
1999. In addition, Mr. Knapp was also Executive Vice President, Chief Operating
Officer, Chief Financial Officer and a director of CCI until August 1996 and was
Executive Vice President and Chief Operating Officer of Cellular Communications
International, Inc. until June 1998. Mr. Knapp was also President, Chief
Executive Officer and a director of Cellular Communications of Puerto Rico until
the CCPR Acquisition, and is President, Chief Executive Officer, Chief Financial
Officer and a director of CoreComm.
Sidney R. Knafel, a director since our formation, has been Managing Partner
of SRK Management Company, a private investment company, since 1981. In
addition, Mr. Knafel is Chairman of Insight Communications, Inc. and BioReliance
Corporation. Mr. Knafel is also a director of General American Investors
Company, Inc., IGENE Biotechnology, Inc., CoreComm and some privately owned
companies and was a director of Cellular Communications of Puerto Rico until the
CCPR Acquisition
Ted H. McCourtney, a director since our formation, is a General Partner of
Venrock Associates, a venture capital investment partnership, a position he has
held since 1970.
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Mr. McCourtney also serves as a director of MedPartners Inc., Visual Networks,
Inc., CoreComm and several privately owned companies.
Del Mintz, a director since our formation, is President of Cleveland Mobile
TeleTrak, Inc. and Cleveland Mobile Radio Sales, Inc. and Ohio Mobile TeleTrak,
Inc., companies providing telephone answering and radio communications services
in Cleveland and Columbus, respectively. Mr. Mintz has held similar positions
with the predecessor of these companies since 1967. Mr. Mintz is also a director
of CoreComm and several privately owned companies and was a director of Cellular
Communications of Puerto Rico until the CCPR Acquisition.
Alan J. Patricof, a director since our formation, is Co-Chairman of
Patricof & Co. Ventures, Inc., a venture capital firm he founded in 1969. Mr.
Patricof also serves as a director of CoreComm, Boston Properties, Inc. and
other privately owned companies and was a director of Cellular Communications of
Puerto Rico until the CCPR Acquisition.
Warren Potash has been a director since our formation. He retired in 1991
as President and Chief Executive Officer of the Radio Advertising Bureau, a
trade association, a position he held since February 1989. Prior to that time
and beginning in 1986, he was President of New Age Communications, Inc., a
communications consultancy firm. Until his retirement in 1986, Mr. Potash was a
Vice President of Capital Cities/ABC Broadcasting, Inc., a position he held
since 1970. Mr. Potash is also a director of CoreComm and was a director of
Cellular Communications of Puerto Rico until the CCPR Acquisition.
Michael S. Willner, a director since October 1993, has served as President
and Chief Operating Officer of Insight Communications Company, Inc. since 1985.
Mr. Willner is currently President of Insight Communications, Inc., a position
he has held since 1985. Mr. Willner is also a director of Source Media, Inc.,
C-Span and the National Cable Television Association, where he is the Treasurer
and serves on the Executive Committee.
Gregg Gorelick, 41, has been our Vice President - Controller since our
formation. From 1981 to 1986 he was employed by Ernst & Whinney (now known as
Ernst & Young LLP). Mr. Gorelick is a certified public accountant and was Vice
President - Controller of CCI from 1986 until August 1996. He also holds that
position at CoreComm (where he is also Treasurer) and held that position at
Cellular Communications of Puerto Rico until the CCPR Acquisition.
John F. Gregg, 35, has been our Senior Vice President, Chief Financial
Officer since June 1999. Prior to that time, commencing in August 1996, he was
Vice President of Corporate Development, and Managing Director of Corporate
Development from 1994. He is Vice Chairman and a director of Virgin Net, a joint
venture between us and Virgin Communications Group. Prior to his employment with
us, Mr. Gregg was employed by Golder, Thoma & Cressey, a venture capital firm.
Richard J. Lubasch, 53, has been our Executive Vice President - General
Counsel and Secretary since June 1999. Prior to that time he was Senior Vice
President - General Counsel and Secretary since our formation. Mr. Lubasch was
Vice President - General Counsel and Secretary of CCI from July 1987 until
August 1996. Mr. Lubasch is also
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Senior Vice President - General Counsel and Secretary of CoreComm and held those
positions at Cellular Communications of Puerto Rico until the CCPR Acquisition.
Steven L. Wagner, 47, is our Vice President-Consumer Services and is Group
Managing Director of the National Media Services division in our U.K.
operations. Mr. Wagner joined us in February 1994 as Group Director of Consumer
Services of the Company's U.K. operations and was appointed Vice
President - Consumer Services of NTL in June 1994. Mr. Wagner has spent the past
fifteen years in consumer and business related activities. Most recently, Mr.
Wagner served as Vice President, Eastern Region for the Walt Disney Company's
premium television service, the Disney Channel.
Leigh Costikyan Wood, 42, has been our Senior Vice President since October
1996 and is the Chief Operating Officer of our U.K. operations. From April 1993
until the CCI merger, Ms. Wood had been the Chief Executive Officer of a Joint
Venture between CCI and AirTouch. From 1982 until 1984, she was Deputy Chief
Financial Officer of General Atlantic Corp., a private investment firm.
Previously, she was employed by Peat Marwick Mitchell & Co. Ms. Wood was Vice
President - Operations of CCI from 1984 until August 1996.
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DESCRIPTION OF THE 2006 NOTES
GENERAL
The new 2006 Notes will be issued pursuant to an indenture, dated as of
November 24, 1999, the closing date, between NTL and The Chase Manhattan Bank,
as 2006 Note Trustee. The following summary of selected provisions of the 2006
Note Indenture is not complete and is qualified in its entirety by reference to
the 2006 Note Indenture, including the definitions therein of certain terms used
below. The definitions of certain terms used in the following summary are set
forth below under "-- Definitions." In this "Description of the 2006 Notes," the
term "NTL" refers to NTL Communications Corp. and not any of its subsidiaries.
The 2006 Notes will be unsecured obligations of NTL, ranking equal in right
of payment with all senior unsecured Indebtedness of NTL and senior in right of
payment to all subordinated Indebtedness of NTL.
The operations of NTL are conducted through its subsidiaries. NTL is
dependent upon the cash flow of its subsidiaries to meet its obligations,
including its obligations under the 2006 Notes. As a result, the 2006 Notes will
be effectively subordinated to all existing and future indebtedness and other
liabilities and commitments of NTL's Subsidiaries with respect to the cash flow
and assets of those subsidiaries.
Application has been made to list the 2006 Notes on the Luxembourg Stock
Exchange. The 2006 Notes are expected to be eligible for trading in the PORTAL
market.
PRINCIPAL, MATURITY AND INTEREST
From the date of issuance (the closing date), the 2006 Notes to be issued
in this exchange offer will be limited in aggregate principal amount to
E250,000,000. Up to an additional E150,000,000 aggregate principal amount of
2006 Notes (the "Additional Notes") may be issued at any time, subject to the
provisions of the 2006 Note Indenture described below under the caption
"Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock". If
the Additional Notes are issued more than one year after November 24, 1999, NTL
will prepare an updated listing memorandum to facilitate the listing of the
Additional Notes with the Luxembourg Stock Exchange. The 2006 Notes will accrue
interest at the rate of 9 1/4% per annum and will be payable in cash,
semi-annually in arrears, on May 15 and November 15 of each year, beginning on
May 15, 2000, to the holders of record on the immediately preceding May 1 and
November 1, respectively. Interest on the 2006 Notes will accrue from the date
of issuance, or the most recent date to which interest has been paid or duly
provided for.
Interest on overdue principal and to the extent permitted by law on overdue
installments of interest will accrue at a rate equal to the rate borne by the
2006 Notes. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. A reference to a payment of interest in respect of the
2006 Notes includes a payment of special interest, if any, and a reference to a
payment of principal includes a reference to a payment of premium, if any.
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The 2006 Notes will be payable both as to principal and interest on
presentation of such 2006 Notes if in certificated form at the offices or
agencies of NTL maintained for such purpose within the City and State of New
York or, at the option of NTL, payment of interest may be made by check mailed
to the holders of the 2006 Notes at their respective addresses set forth in the
register of holders of 2006 Notes or, if a holder so requests, by wire transfer
of immediately available funds to an account previously specified in writing by
such holder to NTL and the 2006 Note Trustee. Until otherwise designated by NTL,
NTL's office or agency in New York and London, respectively, will be the offices
of the 2006 Note Trustee maintained for such purpose. In addition, as described
under the caption "Listing," so long as the 2006 Notes are listed on the
Luxembourg Stock Exchange, an agent for making payments on, and transfers of,
2006 Notes will be maintained in Luxembourg. The 2006 Notes will be payable on
maturity on November 15, 2006 at 100% of their principal amount and will be
issued in registered form, without coupons, and in denominations of E1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
Except as referred to herein under "-- Covenants -- Additional Amounts;
Optional Tax Redemption," the 2006 Notes are not redeemable at NTL's option.
In the case of a redemption of any class of 2006 Notes referred to herein
under "-- Covenants -- Additional Amounts; Optional Tax Redemption," redemption
of such 2006 Notes shall be made at the redemption prices specified in the 2006
Note Indenture plus accrued and unpaid interest, if any, to the applicable
redemption date.
MANDATORY REDEMPTION AND REPURCHASE
NTL is not required to make mandatory redemption or sinking fund payments
with respect to the 2006 Notes. NTL is required to make a Change of Control
Offer (as defined below) and an Asset Sale Offer (as defined below) with respect
to a repurchase of the 2006 Notes under the circumstances described under the
captions "Change of Control" and "Asset Sale", respectively.
CHANGE OF CONTROL
If a Change of Control Triggering Event occurs, each holder of 2006 Notes
shall have the right to require NTL to repurchase all or any part of such
holder's 2006 Notes equal to E1,000 or an integral multiple thereof pursuant to
the offer described below (the "Change of Control Offer") at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. The payment shall be referred to as the Change
of Control Payment. Within 40 days following any Change of Control Triggering
Event, NTL shall mail a notice to each holder, and, if and as long as the 2006
Notes are listed on the Luxembourg Stock Exchange, publish a notice in one
leading newspaper with circulation in Luxembourg, stating:
(1) that the Change of Control Offer is being made pursuant to the covenant
entitled "Change of Control" and that all 2006 Notes tendered will be accepted
for payment;
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(2) the purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 40 days from the date such notice is mailed. This
date is referred to as the "Change of Control Payment Date";
(3) that any 2006 Notes not tendered will continue to accrue interest;
(4) that, unless NTL defaults in the payment of the Change of Control
Payment, all 2006 Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Payment Date;
(5) that holders electing to have any 2006 Notes purchased pursuant to a
Change of Control Offer will be required to surrender the 2006 Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the 2006
Notes completed, to the paying agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date;
(6) that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of 2006 Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such 2006 Notes purchased; and
(7) that holders whose 2006 Notes are being purchased only in part will be
issued new 2006 Notes equal in principal amount to the unpurchased portion of
the 2006 Notes surrendered, which unpurchased portion must be equal to E1,000 in
principal amount or an integral multiple of E1,000.
NTL will comply with the requirements of Rules 13e-4 and 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the 2006 Notes
in connection with a Change of Control Triggering Event.
On the Change of Control Payment Date, NTL will, to the extent lawful:
(1) accept for payment 2006 Notes or portions thereof tendered pursuant to
the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all 2006 Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the 2006 Note Trustee the 2006
Notes so accepted together with an Officers' Certificate stating the 2006 Notes
or portions of the 2006 Notes tendered to NTL.
The paying agent shall promptly mail to each holder of 2006 Notes so
accepted or, if such a holder requests, wire transfer immediately available
funds to an account previously specified in writing by such holder to NTL and
the paying agent, payment in an amount equal to the purchase price for such 2006
Notes, and, if such 2006 Notes are in certificated form, payment may be made at
the office of the paying agent in Luxembourg. The 2006
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Note Trustee shall promptly authenticate and mail to each holder a new 2006 Note
equal in principal amount to any unpurchased portion of the 2006 Notes
surrendered, if any; provided that each such new 2006 Note shall be in a
principal amount of E1,000 or an integral multiple of E1,000. NTL will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Except as described above with respect to a Change of Control Triggering
Event, the 2006 Note Indenture does not contain any other provision that permits
the holders of the 2006 Notes to require that NTL repurchase or redeem the 2006
Notes in the event of a takeover, recapitalization or similar restructuring. The
2006 Note Indenture contains covenants which may afford holders of the 2006
Notes protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction, including the Change of Control
provision described above and the provisions described under "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" and "-- Merger, Consolidation or
Sale of Assets" below. Each of those covenants is, however, subject to
exceptions which may permit NTL to be involved in a highly leveraged transaction
that may adversely affect the holders of the 2006 Notes.
The Change of Control Offer requirement of the 2006 Notes may, in certain
circumstances, make more difficult or discourage a takeover of NTL, and, thus,
the removal of incumbent management. Management has not entered into any
agreement or plan involving a Change of Control, although it is possible that
NTL would decide to do so in the future. Subject to the limitations discussed
below, NTL could, in the future, enter into various transactions including
acquisitions, refinancings or other recapitalizations, that would not constitute
a Change of Control Triggering Event under the 2006 Note Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect NTL's capital structure or credit ratings.
The indentures for our other outstanding senior notes (including the 2009
Notes and the Deferred Coupon Notes) and convertible notes, also contain change
of control provisions.
NTL's ability to pay cash to the holders of 2006 Notes pursuant to a Change
of Control Offer may be limited by NTL's then existing financial resources. See
"Risk Factors -- Our substantial leverage could adversely affect our financial
health and prevent us from fulfilling our obligation under the notes" and "-- We
are a holding company that is dependent upon cash flow from our
subsidiaries -- our ability to access that cash flow may be limited in some
circumstances". Any future credit agreements or other agreements relating to
indebtedness of NTL may, contain prohibitions or restrictions on NTL's ability
to effect a Change of Control Payment. In the event a Change of Control
Triggering Event occurs at a time when such prohibitions or restrictions are in
effect, NTL could seek the consent of its lenders to the purchase of 2006 Notes
and other Indebtedness containing change of control provisions or could attempt
to refinance the borrowings that contain such prohibition. If NTL does not
obtain such a consent or repay such borrowings, NTL will be effectively
prohibited from purchasing 2006 Notes. In such case, NTL's failure to purchase
tendered 2006 Notes would constitute an Event of Default under the 2006 Note
Indenture. Moreover, the events that constitute a Change of Control or require
an Asset Sale Offer
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under the 2006 Note Indenture may also constitute events of default under future
debt instruments or credit agreements of NTL or NTL's Subsidiaries. Such events
of default may permit the lenders under such debt instruments or credit
agreements to accelerate the debt and, if such debt is not paid or repurchased,
to enforce their security interests in what may be all or substantially all of
the assets of NTL's Subsidiaries. Any such enforcement may limit NTL's ability
to raise cash to repay or repurchase the 2006 Notes.
NTL will not be required to make a Change of Control Offer in the event NTL
enters into a transaction with management or their affiliates who are Permitted
Holders. The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of NTL's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of 2006 Notes to require NTL to repurchase such 2006 Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of the
assets of NTL and its Subsidiaries to another Person may be uncertain.
ASSET SALE
The 2006 Note Indenture provides that NTL will not and will not permit any
of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale,
unless:
(1) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale;
(2) NTL, or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced for purposes of this covenant by
a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the 2006 Note Trustee) of the assets
sold or otherwise disposed of; and
(3) at least 80% of the consideration therefor received by NTL or
such Restricted Subsidiary is in the form of:
(a) Cash Equivalents;
(b) Replacement Assets;
(c) publicly traded Equity Interests of a Person who is,
directly or indirectly, engaged primarily in one or more
Cable Businesses; provided, however, that NTL or the
Restricted Subsidiary shall Monetize the Equity Interests
by sale to one or more Persons (other than to NTL or a
Subsidiary thereof) at a price not less than the fair
market value thereof within 180 days of the consummation of
the Asset Sale; or
(d) any combination of the foregoing clauses (a) through (c);
provided, however, that the amount of:
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(x) any liabilities, as shown on NTL's or the Restricted
Subsidiary's most recent balance sheet or in the notes
thereto, of NTL or any Restricted Subsidiary, other than
liabilities that are by their terms subordinated to the
2006 Notes, that are assumed by the transferee of any
such assets; and
(y) any notes or other obligations received by NTL or any
Restricted Subsidiary from such transferee that are
within five Business Days converted by NTL or the
Restricted Subsidiary into cash, shall be deemed to be
Cash Equivalents, to the extent of the Cash Equivalents
received in such conversion, for purposes of this clause
(3).
Within 360 days after any Asset Sale, NTL, or the Restricted Subsidiary, as
the case may be, will cause the Net Proceeds from the Asset Sale:
(1) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary; or
(2) to be invested or reinvested in Replacement Assets.
Pending final application of any the Net Proceeds, NTL may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by the 2006 Note Indenture.
Any Net Proceeds from any Asset Sale that are not used or reinvested as
provided in the preceding sentence constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $15.0 million, NTL will make an
Asset Sale Offer to all holders of 2006 Notes and Other Qualified Notes to
purchase the maximum principal amount of 2006 Notes and Other Qualified Notes,
determined on a pro rata basis according to the Accreted Value or principal
amount, as the case may be, of the 2006 Notes and the Other Qualified Notes that
may be purchased out of the Excess Proceeds:
(1) with respect to the Other Qualified Notes, based on the terms set
forth in the indenture related to each issue of the Other
Qualified Notes; and
(2) with respect to the 2006 Notes, at an offer price in cash in an
amount equal to 100% of the outstanding principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set
forth in the 2006 Note Indenture.
To the extent that the aggregate principal amount or Accreted Value, as the
case may be, of 2006 Notes and Other Qualified Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, NTL may use such deficiency
for general corporate purposes. If the aggregate principal amount or Accreted
Value, as the case may be, of 2006 Notes and Other Qualified Notes surrendered
by holders thereof exceeds the amount of Excess Proceeds then the remaining
Excess Proceeds will be allocated pro rata according to Accreted Value or
principal amount, as the case may be, to the 2006 Notes and each issue of the
Other Qualified Notes, and the 2006 Note Trustee will select the 2006 Notes to
be purchased from the amount allocated to the 2006 Notes on the basis set forth
under "Selection and Notice" below. Upon completion of such offers to purchase
each of the
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2006 Notes and the Other Qualified Notes, the amount of Excess Proceeds will be
reset at zero.
Notwithstanding the foregoing, NTL and its Subsidiaries may:
(1) sell, lease, transfer, convey or otherwise dispose of assets or
property acquired after October 14, 1993, by NTL or any
Subsidiary in a sale-and-leaseback transaction so long as the
proceeds of such sale are applied within five Business Days to
permanently reduce Indebtedness of a Restricted Subsidiary or if
there is no such Indebtedness or such proceeds exceed the amount
of such Indebtedness then such proceeds or excess proceeds are
reinvested in Replacement Assets within 360 days after such sale,
lease, transfer, conveyance or disposition;
(2) (x) swap or exchange assets or property with a Cable Controlled
Subsidiary; or
(y) issue, sell, lease, transfer, convey or otherwise dispose of
equity securities of any of NTL's Subsidiaries to a Cable
Controlled Subsidiary, in each of cases (x) and (y) so long
as:
(A) the ratio of Indebtedness to Annualized Pro Forma EBITDA
of NTL after such transaction is equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA
of NTL immediately preceding such transaction; provided,
however, that if the ratio of Indebtedness to Annualized
Pro Forma EBITDA of NTL immediately preceding such
transaction is 6:1 or less, then the ratio of
Indebtedness to Annualized Pro Forma EBITDA of NTL may
be 0.5 greater than such ratio immediately preceding
such transaction; and
(B) either:
(I) the assets so contributed consist solely of a
license to operate a Cable Business and the Net
Households covered by all of the licenses to
operate cable and telephone systems held by NTL
and its Restricted Subsidiaries immediately after
and giving effect to such transaction equals or
exceeds the number of Net Households covered by
all of the licenses to operate cable and telephone
systems held by NTL and its Restricted
Subsidiaries immediately prior to such
transaction; or
(II) the assets so contributed consist solely of Cable
Assets and the value of the Capital Stock
received, immediately after and giving effect to
such transaction, as determined by an investment
banking firm of recognized standing with knowledge
of the Cable Business, equals or exceeds the value
of the Cable Assets exchanged for such Capital
Stock; or
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(3) issue, sell, lease, transfer, convey or otherwise dispose of
Equity Interests of NTL, or any Capital Stock Sales Proceeds
therefrom, to any Person including Non-Restricted Subsidiaries.
SELECTION AND NOTICE
If less than all of the 2006 Notes are to be redeemed at any time,
selection of 2006 Notes for redemption will be made by the 2006 Note Trustee in
compliance with the requirements of any securities exchange on which the 2006
Notes are listed. In the absence of any requirements of any securities exchange
or if the 2006 Notes are not so listed, selection of the 2006 Notes to be
redeemed will be made on a pro rata basis, provided that no 2006 Notes of E1,000
or less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of 2006 Notes to be redeemed at its registered address. If any 2006
Note is to be redeemed in part only, the notice of redemption that relates to
such 2006 Note shall state the portion of the principal amount thereof to be
redeemed. A new 2006 Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original 2006 Note. On and after the redemption date, interest ceases to
accrue on 2006 Notes or portions of them called for redemption.
If the 2006 Notes are listed on the Luxembourg Stock Exchange, NTL will
publish a redemption notice in a daily newspaper with general circulation in
Luxembourg.
COVENANTS
RESTRICTED PAYMENTS
The 2006 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution on account
of NTL's or any of its Restricted Subsidiaries' Equity Interests,
other than:
(x) dividends or distributions payable in Equity Interest, other
than Disqualified Stock, of NTL or such Restricted
Subsidiary;
(y) dividends or distributions payable to NTL or any Wholly
Owned Subsidiary of NTL; or
(z) pro rata dividends or pro rata distributions payable by a
Restricted Subsidiary;
(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of NTL, other than any such Equity Interests
owned by NTL or any Wholly Owned Subsidiary of NTL;
(3) voluntarily purchase, redeem or otherwise acquire or retire for
value any Indebtedness that is subordinated to the 2006 Notes; or
(4) make any Restricted Investment.
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All such payments and other actions set forth in clauses (1) through (4)
above are collectively referred to as Restricted Payments.
NTL or the Restricted Subsidiary may make a Restricted Payment if, at the
time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by NTL and its Restricted
Subsidiaries after the Issuance Date, including Restricted
Payments permitted by clauses (2) through (10) of the next
succeeding paragraph, is less than the sum of:
(x) the difference between Cumulative EBITDA and 1.5 times
Cumulative Interest Expense plus
(y) Capital Stock Sale Proceeds plus
(z) cash received by NTL or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which is or
is required to be repaid or returned to such
Non-Restricted Subsidiary); provided, however, that to
the extent that any Restricted Investment that was
made after the date of the 2006 Note Indenture is sold
for cash or otherwise liquidated or repaid for cash,
the amount credited pursuant to this clause (z) shall
be the lesser of:
(A) the cash received with respect to such sale,
liquidation or repayment of such Restricted
Investment, less the cost of such sale,
liquidation or repayment, if any; and
(B) the initial amount of such Restricted Investment,
in each case as determined in good faith by NTL's
Board of Directors.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the 2006 Note
Indenture;
(2) (x) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of NTL or any Restricted Subsidiary;
or
(y) an Investment in any Person
in each case, in exchange for, or out of the proceeds of, the
substantially concurrent sale, other than to a Restricted Subsidiary of
NTL, of other Equity Interests (other than any Disqualified Stock) of
NTL provided that NTL delivers to the 2006 Note Trustee:
(A) with respect to any transaction involving in excess of $1.0
million, a resolution of the Board of Directors set forth
in an Officers' Certificate
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certifying that such transaction is approved by a majority of
the directors on the Board of Directors; and
(B) with respect to any transaction involving in excess of
$25.0 million, an opinion as to the fairness to NTL or the
Restricted Subsidiary from a financial point of view issued
by an investment banking firm of national standing with
high yield experience, together with an Officers'
Certificate to the effect that such opinion complies with
this clause (2);
(3) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which:
(A) has no Indebtedness on a consolidated basis other than
Indebtedness incurred to finance the purchase of equipment
used in a Cable Business;
(B) has no restrictions (other than restrictions imposed or
permitted by the 2006 Note Indenture or the indentures
governing the Other Qualified Notes or any other instrument
governing unsecured indebtedness of NTL which is pari passu
with the 2006 Notes) on its ability to pay dividends or
make any other distributions to NTL or any of its
Restricted Subsidiaries;
(C) is or will be a Cable Business; and
(D) uses the proceeds of such Investment for constructing a
Cable Business or the working capital needs of a Cable
Business;
(4) the redemption, purchase, defeasance, acquisition or retirement
of Indebtedness that is subordinated to the 2006 Notes (including
premium, if any, and accrued and unpaid interest) made by
exchange for, or out of the proceeds of the substantially
concurrent sale, other than to a Restricted Subsidiary of NTL,
of:
(A) Equity Interests of NTL; or
(B) Refinancing Indebtedness permitted to be incurred under the
"Incurrence of indebtedness and issuance of preferred
stock" covenant;
(5) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which is or will be a Cable Business
in an amount not to exceed $100.0 million in the aggregate plus
the sum of:
(A) cash received by NTL or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which is or is
required to be repaid or returned to such Non-Restricted
Subsidiary); and
(B) Capital Stock Sale Proceeds, excluding the aggregate net
sale proceeds to be received upon conversion of the
Convertible Subordinated Notes;
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(6) Investments by NTL or any Restricted Subsidiary in Permitted
Non-Controlled Assets;
(7) Investments by NTL or any Restricted Subsidiary in SDN Limited,
a joint venture organized to operate a digital terrestrial
television multiplex, in an amount not exceeding L11.4 million;
(8) the extension by NTL or any Restricted Subsidiary of trade
credit to a Non-Restricted Subsidiary extended on usual and
customary terms in the ordinary course of business, provided
that the aggregate amount of such trade credit shall not exceed
$25.0 million at any one time;
(9) the payment of cash dividends on the Preferred Stock accruing on
or after February 15, 2004 or any mandatory redemption or
repurchase of the Preferred Stock, in each case, in accordance
with the Certificate of Designations therefor; and
(10) the exchange of all of the outstanding shares of Preferred Stock
for Subordinated Debentures in accordance with the Certificate
of Designation for the Preferred Stock.
Any Investment in a Subsidiary, other than the issuance, transfer or other
conveyance of Equity Interests of NTL or any Capital Stock Sales Proceeds
therefrom, that is designated by the Board of Directors as a Non-Restricted
Subsidiary shall become a Restricted Payment made on the date of such
designation in the amount of the greater of:
(x) the book value of such Subsidiary on the date such Subsidiary
becomes a Non-Restricted Subsidiary; and
(y) the fair market value of such Subsidiary on such date as
determined:
(A) in good faith by the Board of Directors of such Subsidiary
if such fair market value is determined to be less than
$25.0 million; and
(B) by an investment banking firm of national standing with high
yield underwriting expertise if such fair market value is
determined to be in excess of $25.0 million.
Not later than the fifth Business Day after making any Restricted Payment
(other than those referred to in sub-clause (8) of the second paragraph
preceding this paragraph), NTL shall deliver to the 2006 Note Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, which calculations may be based upon NTL's
latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The 2006 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable with respect
to any Indebtedness, including Acquired Debt, and that NTL will not issue any
Disqualified Stock and will not permit any
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of its Restricted Subsidiaries to issue any shares of preferred stock that is
Disqualified Stock; provided, however, that NTL may incur Indebtedness or issue
shares of Disqualified Stock and any of its Restricted Subsidiaries may issue
shares of preferred stock that is Disqualified Stock if after giving effect to
such issuance or incurrence on a pro forma basis, the sum of:
(x) Indebtedness of NTL and its Restricted Subsidiaries, on a
consolidated basis;
(y) the liquidation value of outstanding preferred stock of
Restricted Subsidiaries; and
(z) the aggregate amount payable by NTL and its Restricted
Subsidiaries, on a consolidated basis, upon redemption of
Disqualified Stock to the extent such amount is not included in
the preceding clause (y) shall be less than the product of
Annualized Pro Forma EBITDA for the latest fiscal quarter for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock or preferred stock is issued
multiplied by 7.0, determined on a pro forma basis, including a
pro forma application of the net proceeds therefrom, as if the
additional Indebtedness had been incurred, or the Disqualified
Stock or preferred stock had been issued, as the case may be, at
the beginning of such quarter.
The foregoing limitations will not apply to:
(a) the incurrence by NTL or any Restricted Subsidiary of
Indebtedness pursuant to the Credit Facility;
(b) the issuance by any Restricted Subsidiary of preferred stock
(other than Disqualified Stock) to NTL, any Restricted Subsidiary
of NTL or the holders of Equity Interests in any Restricted
Subsidiary on a pro rata basis to such holders;
(c) the incurrence of Indebtedness or the issuance of preferred stock
by NTL or any of its Restricted Subsidiaries the proceeds of
which are (or the credit support provided by any such
Indebtedness is), in each case, used to finance the construction,
capital expenditure and working capital needs of a Cable Business
(including, without limitation, payments made pursuant to any
License), the acquisition of Cable Assets or the Capital Stock of
a Qualified Subsidiary;
(d) the incurrence by NTL or any of its Restricted Subsidiaries of
additional Indebtedness in an outstanding aggregate principal
amount not to exceed $100.0 million at any time;
(e) the incurrence by NTL or any Restricted Subsidiary of any
Permitted Acquired Debt;
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(f) the incurrence by NTL or any Subsidiary of Indebtedness issued in
exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, or refund the 2006 Notes, the 2009
Notes or the Deferred Coupon Notes issued in this offering,
Existing Indebtedness or Indebtedness referred to in clauses (a),
(b), (c), (d) or (e) above or Indebtedness incurred pursuant to
the preceding paragraph (the "Refinancing Indebtedness");
provided, however, that:
(1) the principal amount of, and any premium payable in respect
of, such Refinancing Indebtedness shall not exceed the
principal amount of Indebtedness so extended, refinanced,
renewed, replaced or refunded (plus the amount of reasonable
expenses incurred in connection therewith);
(2) the Refinancing Indebtedness shall have:
(A) a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed,
replaced or refunded; and
(B) a stated maturity no earlier than the stated maturity
of, the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and
(3) the Refinancing Indebtedness shall be subordinated in right
of payment to the 2006 Notes as and to the extent of the
Indebtedness being extended, refinanced, renewed, replaced
or refunded;
(g) the issuance of the Preferred Stock in lieu of payment of cash
interest on the Subordinated Debentures or the incurrence by NTL
of Indebtedness represented by the Subordinated Debentures upon
the exchange of the Preferred Stock in accordance with the
Certificate of Designations therefor;
(h) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts are related to payment obligations under
Existing Indebtedness or Indebtedness incurred under this
paragraph or the preceding paragraph that are being hedged
thereby, and not for speculation and that the aggregate notional
amount under each such Exchange Rate Contract does not exceed the
aggregate payment obligations under such Indebtedness;
(i) Indebtedness under Interest Rate Agreements, provided that the
obligations under such agreements are related to payment
obligations on Existing Indebtedness or Indebtedness otherwise
incurred pursuant to this paragraph or the preceding paragraph,
and not for speculation;
(j) the incurrence of Indebtedness between NTL and any Restricted
Subsidiary, between or among Restricted Subsidiaries and between
any Restricted Subsidiary and other holders of Equity Interests
of such Restricted Subsidiary (or other Persons providing funding
on their behalf) on a pro rata basis and on substantially
identical principal financial terms, provided,
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however, that if any such Restricted Subsidiary that is the payee
of any such Indebtedness ceases to be a Restricted Subsidiary or
transfers such Indebtedness (other than to NTL or a Restricted
Subsidiary of NTL), such events shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by NTL or by a
Restricted Subsidiary, as the case may be, at the time of such
event; and
(k) Indebtedness of NTL and/or any Restricted Subsidiary in respect
of performance bonds of NTL or any Subsidiary or surety bonds
provided by NTL or any Restricted Subsidiary received in the
ordinary course of business in connection with the construction
or operation of a Cable Business.
Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary
shall be deemed for purposes of the foregoing covenant to be an incurrence of
Indebtedness by NTL and its Restricted Subsidiaries of the Indebtedness of such
Non-Restricted Subsidiary as of the time of such redesignation to the extent
such Indebtedness does not already constitute Indebtedness of NTL or one of its
Restricted Subsidiaries.
LIENS
The 2006 Note Indenture provides that neither NTL nor any of its Restricted
Subsidiaries may directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except:
(1) Permitted Liens;
(2) Liens securing Indebtedness and related obligations incurred
under clauses (a), (b), (c), (d), (e), (h), (i) and (k) of the
second paragraph of the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant;
(3) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant; and
(4) Liens securing Refinancing Indebtedness permitted to be incurred
under the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; provided that the Refinancing Indebtedness so
issued and secured by such Lien shall not be secured by any
property or assets of NTL or any of its Restricted Subsidiaries
other than the property or assets subject to the Liens securing
such Indebtedness being refinanced.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The 2006 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist
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or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to NTL or any
of its Subsidiaries:
(A) on its Capital Stock; or
(B) with respect to any other interest or participation in,
or measured by, its profits; or
(b) pay any indebtedness owed to NTL or any of its Subsidiaries;
or
(2) make loans or advances to NTL or any of its Subsidiaries; or
(3) transfer any of its properties or assets to NTL or any of its
Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(a) Existing Indebtedness as in effect on the Issuance Date;
(b) the indentures relating to the 2006 Notes, 2009 Notes and
the Deferred Coupon Notes; or
(c) any agreement covering or relating to Indebtedness
permitted to be incurred under clause (a), (b), (c), (d),
(e), (h) or (i) (but only, in the case of clause (h) or
(i), to the extent contemplated by the then-existing Credit
Facility) of the second paragraph of the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant,
provided that the provisions of such agreement permit any
action referred to in clause (a) above in aggregate amounts
sufficient to enable the payment of interest and principal
and mandatory repurchases pursuant to the terms of the 2006
Note Indenture and the 2006 Notes but provided further
that:
(x) any such agreement may nevertheless encumber,
prohibit or restrict any action referred to in clause
(a) above if an event of default under such agreement
has occurred and is continuing or would occur as a
result of any such action; and
(y) any such agreement may nevertheless contain:
(I) restrictions limiting the payment of dividends
or the making of any other distributions to
all or a portion of excess cash-flow (or any
similar formulation thereof); and
(II) subordination provisions governing
Indebtedness owed to NTL or any Restricted
Subsidiary;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a
Person acquired by NTL or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such
Indebtedness was incurred in
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connection with such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; provided that the EBITDA of
such Person is not taken into account in determining whether such
acquisition was permitted by the terms of the 2006 Note Indenture;
(6) customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) provisions of joint venture or stockholder agreements, so long as
such provisions are determined by a resolution of the Board of
Directors to be, at the time of such determination, customary for
such agreements;
(8) with respect to clause (c) above, purchase money obligations for
property acquired in the ordinary course of business or the
provisions of any agreement with respect to any Asset Sale (or
transaction which, but for its size, would be an Asset Sale),
solely with respect to the assets being sold; or
(9) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such
Refinancing Indebtedness are determined by a resolution of the
Board of Directors to be no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The 2006 Note Indenture provides that NTL may not consolidate or merge with
or into, whether or not NTL is the surviving corporation, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
(1) NTL is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger, if other
than NTL, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or
the Cayman Islands or of the United States, any state thereof or
the District of Columbia;
(2) the entity or Person formed by or surviving any such
consolidation or merger, if other than NTL, or the entity or
Person to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all
the Obligations, including the due and punctual payment of
Additional Amounts, as defined in the 2006 Note Indenture, if the
surviving corporation is a corporation organized or existing
under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, of NTL,
pursuant to a supplemental indenture in a
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form reasonably satisfactory to the 2006 Note Trustee, under the
2006 Notes and the 2006 Note Indenture;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) NTL or any entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been
made will have a ratio of Indebtedness to Annualized Pro Forma
EBITDA equal to or less than the ratio of Indebtedness to
Annualized Pro Forma EBITDA of NTL immediately preceding the
transaction provided, however, that if the ratio of Indebtedness
to Annualized Pro Forma EBITDA of NTL immediately preceding such
transaction is 6:1 or less, then the ratio of Indebtedness to
Annualized Pro Forma EBITDA of NTL may be 0.5 greater than such
ratio immediately preceding such transaction; and
(5) such transaction would not result in the loss of any material
authorization or Material License of NTL or its Subsidiaries.
ADDITIONAL AMOUNTS; OPTIONAL TAX REDEMPTION
The 2006 Note Indenture provides that the "Payment of Additional Amounts"
provision in the 2006 Note Indenture, relating to United Kingdom, Netherlands,
Netherlands Antilles, Bermuda and Cayman Islands withholding and other United
Kingdom, Netherlands, Netherlands Antilles, Bermuda and Cayman Islands taxes,
and the "Optional Tax Redemption" provision in the 2006 Note Indenture, relating
to NTL's option to redeem the 2006 Notes under specified circumstances if
Additional Amounts are payable, apply to the 2006 Notes in specified
circumstances. The provisions of the 2006 Note Indenture relating to the payment
of Additional Amounts will only apply in the event that NTL becomes, or a
successor to NTL is, a corporation organized or existing under the laws of the
United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands. In such circumstances, all payments made by NTL on the 2006 Notes will
be made without deduction or withholding, for or on account of, any and all
present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law. If any deduction or
withholding for or on account of any present or future taxes, assessments or
other governmental charges of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, or any political
subdivision or taxing authority thereof or therein, shall at any time be
required in respect of any amounts to be paid by NTL under the 2006 Notes, NTL
will pay or cause to be paid such additional amounts ("Additional Amounts") as
may be necessary in order that the net amounts received by a holder of the 2006
Notes after such deduction or withholding shall be not less than the amounts
specified in the 2006 Notes to which the holder of such 2006
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Notes is entitled; provided, however, that NTL shall not be required to make any
payment of Additional Amounts for or on account of:
(1) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have
been imposed but for:
(a) the existence of any present or former connection between
such holder, or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, nominee, trust,
partnership or corporation, other than the holding of the
2006 Notes or the receipt of amounts payable in respect of
the 2006 Notes and the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands or any
political subdivision or taxing authority thereof or
therein, including, without limitation, such holder or such
fiduciary, settlor, beneficiary, member, shareholder or
possessor, being or having been a citizen or resident
thereof or being or having been present or engaged in trade
or business therein or having had a permanent establishment
therein; or
(b) the presentation of the 2006 Notes, where presentation is
required, for payment on a date more than 30 days after the
date on which such payment became due and payable or the
date on which payment thereof is duly provided for,
whichever occurs later, except to the extent that the holder
would have been entitled to Additional Amounts had the 2006
Notes been presented on the last day of such period of 30
days;
(2) any governmental charge that is imposed or withheld by reason of
the failure to comply by the holder of the 2006 Notes or, if
different, the beneficial owner of the interest payable on the
2006 Notes, with a timely request of NTL addressed to such holder
or beneficial owner to provide information, documents or other
evidence concerning the nationality, identity or connection with
the taxing jurisdiction of such holder or beneficial owner which
is required or imposed by a statute, regulation or administrative
practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax assessment or governmental
charge;
(3) any estate, inheritance, gift, sales, transfer, personal property
or similar tax assessment or other governmental charge;
(4) any tax assessment or other governmental charge which is
collectible otherwise than by withholding from payments of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a 2006 Note or withholding from the
proceeds of a sale or exchange of a 2006 Note;
(5) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal
amount, redemption amount, Change of Control Payment or interest
with respect to a 2006 Note,
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if such payment can be made, and is in fact made, without such
withholding by any other paying agent located inside the United
States;
(6) any tax, assessment or other governmental charge imposed on a
holder that is not the beneficial owner of a 2006 Note to the
extent that the beneficial owner would not have been entitled to
the payment of any such Additional Amounts had the beneficial
owner directly held the 2006 Note; or
(7) any combination of items (1), (2), (3), (4), (5) and (6) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on the 2006 Notes to any holder who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the holder of the 2006
Notes.
The 2006 Notes may be redeemed at the option of NTL, in whole but not in
part, upon not less than 30 nor more than 60 days notice, at any time upon the
circumstances set forth below. The redemption price will be equal to the
principal amount thereof plus accrued and unpaid interest to the date fixed for
redemption, if after the Issuance Date there has occurred any change in or
amendment to the laws or any regulations or official rulings promulgated
thereunder of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands, or any political subdivision or taxing authority
thereof or therein, or any change in or amendment to the official application or
interpretation of such laws, regulation or rulings which becomes effective after
the Issuance Date, as a result of which NTL is or would be so required on the
next succeeding Interest Payment Date to pay Additional Amounts with respect to
the 2006 Notes with respect to withholding taxes imposed by the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, or any
political subdivision or taxing authority thereof or therein, (a "Withholding
Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if
any) at which any Withholding Tax was imposed on the Issuance Date provided
that:
(1) this paragraph shall not apply to the extent that, at the
Relevant Date, it was known or would have been known had
professional advice of a nationally recognized accounting firm in
the United Kingdom, Netherlands, Netherlands Antilles, Bermuda or
the Cayman Islands, as the case may be, been sought, that a
Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, was to occur
after the Issuance Date;
(2) no such notice of redemption may be given earlier than 90 days
prior to the earliest date on which NTL would be obliged to pay
such Additional Amounts were a payment in respect of the 2006
Notes then due;
(3) at the time such notice of redemption is given, such obligation
to pay such Additional Amount remains in effect; and
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(4) the payment of such Additional Amounts cannot be avoided by the
use of any reasonable measures available to NTL.
The 2006 Notes may also be redeemed, in whole but not in part, at any time
upon the circumstances set forth below. The redemption price will be equal to
the principal amount of the 2006 Notes plus accrued and unpaid interest to the
date fixed for redemption if the person formed after the Issuance Date by a
consolidation, amalgamation, reorganization, reconstruction or other similar
arrangement of NTL or the person into which NTL is merged after the Issuance
Date or to which NTL conveys, transfers or leases its properties and assets
after the Issuance substantially as an entirety (collectively, a "Subsequent
Consolidation") is required, as a consequence of such Subsequent Consolidation
and as a consequence of a Change in Tax Law in the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring
after the date of such Subsequent Consolidation to pay Additional Amounts with
respect to 2006 Notes with respect to Withholding Tax and such Withholding Tax
is imposed at a rate that exceeds the rate, if any, at which Withholding Tax was
or would have been imposed on the date of such Subsequent Consolidation. This
paragraph shall not apply to the extent that, at the date of such Subsequent
Consolidation it was known or would have been known had professional advice of a
nationally recognized accounting firm in the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be,
been sought, that a Change in Tax Law in the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands, was to occur after such
date.
NTL will also pay, or make available for payment, to holders on the
redemption date any Additional Amounts resulting from the payment of such
redemption price.
TRANSACTIONS WITH AFFILIATES
The 2006 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to NTL or the relevant Subsidiary than those that could have been
obtained in a comparable transaction by NTL or such Subsidiary
with an unrelated Person; and
(2) NTL delivers to the 2006 Note Trustee:
(a) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1.0 million or any series
of Affiliate Transactions with an Affiliate involving
aggregate payments in excess of $1.0 million, a resolution
of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction
complies with clause (1) above and such Affiliate
Transaction is approved by a majority of the disinterested
directors on the Board of Directors; and
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(b) with respect to any Affiliate Transaction or any series of
Affiliate Transactions involving aggregate payments in
excess of $25.0 million, an opinion as to the fairness to
NTL or such Subsidiary from a financial point of view
issued by an investment banking firm of national standing
with high yield experience together with an Officers'
Certificate to the effect that such opinion complies with
this clause (b);
provided, however, that notwithstanding the foregoing provisions,
the following shall not be deemed to be Affiliate Transactions:
(1) any employment agreement entered into by NTL or any of its
Subsidiaries in the ordinary course of business and consistent
with the past practice of NTL or its predecessor or such
Subsidiary;
(2) transactions between or among NTL and/or its Restricted
Subsidiaries;
(3) transactions permitted by the provisions of the 2006 Note
Indenture described above under the covenant "Restricted
Payments;"
(4) Liens permitted under the Liens covenant which are granted by NTL
or any of its Subsidiaries to an unrelated Person for the benefit
of NTL or any other Subsidiary of NTL;
(5) any transaction pursuant to an agreement in effect on the
Issuance Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary where
such Indebtedness is owed to the holders of the Equity Interests
of such Restricted Subsidiary on a pro rata basis and on
substantially identical principal financial terms;
(7) management, operating, service or interconnect agreements entered
into in the ordinary course of business with any Cable Business
in which NTL or any Restricted Subsidiary has an Investment and
which is not a Cable Controlled Subsidiary, and of which no
Affiliate of NTL is an Affiliate other than as a result of such
Investment, and
(8) any tax sharing agreement.
REPORTS
Whether or not required by the rules and regulations of the SEC, so long as
any 2006 Notes are outstanding, NTL will file with the SEC and furnish to the
holders of 2006 Notes all quarterly and annual financial information required to
be contained in a filing with the SEC on Forms 10-Q and 10-K, or the equivalent
of those reports under the Exchange Act for foreign private issuers in the event
NTL becomes a corporation organized under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, including
a "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report by NTL's
certified independent accountants, in each case, as required by the rules and
regulations of the SEC as in effect on the Issuance Date. NTL does not publish
unconsolidated financial reports.
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EVENTS OF DEFAULT AND REMEDIES
The 2006 Note Indenture provides that each of the following constitutes an
Event of Default:
(1) default for 30 days in the payment when due of interest and
Additional Amounts, if applicable on the 2006 Notes;
(2) default in payment when due of principal on the 2006 Notes;
(3) failure by NTL to comply with the provisions described under the
covenants "Change of Control," "Restricted Payments" or
"Incurrence of Indebtedness and Issuance of Preferred Stock";
(4) failure by NTL for 60 days after notice to comply with certain
other covenants and agreements contained in the 2006 Note
Indenture or the 2006 Notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by NTL or any of its
Restricted Subsidiaries, or the payment of which is guaranteed by
NTL or any of its Restricted Subsidiaries, whether such
Indebtedness or guarantee now exists, or is created after the
Issuance Date, which default:
(a) is caused by a failure to pay when due principal or
interest on such Indebtedness within the grace period
provided in such Indebtedness, which Payment Default
continues beyond any applicable grace period; or
(b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which
has been so accelerated, aggregates $10.0 million or more;
(6) failure by NTL or any Restricted Subsidiary of NTL to pay final
judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in
excess of $5.0 million, which judgments are not stayed within 60
days after their entry;
(7) certain events of bankruptcy or insolvency with respect to NTL or
any of its Material Subsidiaries; and
(8) the revocation of a Material License.
If any Event of Default occurs and is continuing, the 2006 Note Trustee or
the holders of at least 25% in principal amount of then outstanding 2006 Notes
may declare all the 2006 Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to NTL or any Material
Subsidiary, all outstanding 2006 Notes will become due
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and payable without further action or notice. Holders of the 2006 Notes may not
enforce the 2006 Note Indenture or the 2006 Notes except as provided in the 2006
Note Indenture. Subject to certain limitations, holders of a majority in
principal amount of outstanding 2006 Notes may direct the 2006 Note Trustee in
its exercise of any trust or power. The 2006 Note Trustee may withhold from
holders of the 2006 Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of each class of
2006 Notes then outstanding by notice to the 2006 Note Trustee may on behalf of
the holders of all of the applicable class of 2006 Notes waive any existing
Default or Event of Default and its consequences under the 2006 Note Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the 2006 Notes.
NTL is required to deliver to the 2006 Note Trustee annually a statement
regarding compliance with the 2006 Note Indenture, and NTL is required, upon
becoming aware of any Default or Event of Default, to deliver to the 2006 Note
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of NTL, as
such, shall have any liability for any Obligations of NTL under the 2006 Notes
or the 2006 Note Indenture or for any claim based on, in respect of, or by
reason of, such Obligations or their creation. Each holder of the 2006 Notes by
accepting a 2006 Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the 2006 Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws, and it is the view of the SEC that a waiver of such liabilities is against
public policy.
DEFEASANCE AND DISCHARGE OF THE 2006 NOTE INDENTURE AND THE 2006 NOTES
NTL may cause the defeasance of the 2006 Notes if NTL irrevocably deposits,
or causes to be deposited, in trust with the 2006 Note Trustee or the paying
agent, at any time prior to the stated maturity of the 2006 Notes or the date of
redemption of all the outstanding 2006 Notes, as trust funds in trust, money or
direct noncallable obligations of or guaranteed by the United States of America
in an amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants, without reinvestment thereof, to pay timely and
discharge the entire principal of the then outstanding 2006 Notes of such class
and all interest due thereon to maturity or redemption. The 2006 Note Indenture
will then cease to be of further effect as to all outstanding 2006 Notes except,
among other things, as to:
(1) remaining rights of registration of transfer and substitution and
exchange of the 2006 Notes of such class;
(2) rights of holders to receive payment of principal of and interest
on the 2006 Notes; and
(3) the rights, obligations and immunities of the 2006 Note Trustee.
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In order to exercise Defeasance:
(1) NTL shall have delivered to the 2006 Note Trustee an Opinion of
Counsel reasonably acceptable to the 2006 Note Trustee confirming
that:
(a) NTL has received from, or there has been published by, the
Internal Revenue Service, a ruling; or
(b) since the date of the 2006 Note Indenture, there has been a
change in the applicable federal income tax law, in either
case to the effect that, and based thereon, such Opinion of
Counsel shall confirm that the holders of the outstanding
2006 Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Defeasance
and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would
have been the case if such Defeasance had not occurred;
(2) no Event of Default shall have occurred and be continuing on the
date of such deposit (other than an Event of Default resulting
from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(3) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument
(other than the 2006 Note Indenture) to which NTL or any of its
Subsidiaries is a party or by which NTL or any of its
Subsidiaries is bound;
(4) NTL shall have delivered to the 2006 Note Trustee an Opinion of
Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(5) NTL shall have delivered to the 2006 Note Trustee an Officers'
Certificate stating that the deposit was not made by NTL with the
intent of preferring the holders of 2006 Notes over the other
creditors of NTL with the intent of defeating, hindering,
delaying or defrauding creditors of NTL or others;
(6) the deposit shall not result in NTL, the 2006 Note Trustee or the
trust being subject to the Investment Company Act of 1940;
(7) holders of the 2006 Notes will have a valid, perfected and
unavoidable (under applicable bankruptcy or insolvency laws),
subject to the passage of time referred to in clause (4) above,
first priority security interest in the trust funds; and
(8) NTL shall have delivered to the 2006 Note Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the Defeasance have been
complied with.
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UNCLAIMED MONEY, PRESCRIPTION
If money deposited with the 2006 Note Trustee or paying agent for the
payment of principal or interest remains unclaimed for two years, the 2006 Note
Trustee and the paying agent shall pay the money back to NTL at its written
request. After that, holders of 2006 Notes entitled to the money must look to
NTL for payment unless an abandoned property law designates another person and
all liability of the 2006 Note Trustee and such paying agent shall cease. Other
than as set forth in this paragraph, the 2006 Note Indenture does not provide
for any prescription period for the payment of interest and principal on the
2006 Notes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the 2006 Notes in accordance
with procedures described in "Book-Entry; Delivery and Form." The registrar and
the 2006 Note Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and NTL may require a holder to
pay any taxes and fees required by law or permitted by the 2006 Note Indenture.
NTL is not required to transfer or exchange any 2006 Note selected for
redemption. Also, NTL is not required to transfer or exchange any 2006 Note for
a period of 15 days before a selection of 2006 Notes to be redeemed. All
transfers or exchanges of certificated notes may be effected at the offices of
the transfer agent in Luxembourg.
The registered holder of a 2006 Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the 2006 Note
Indenture or 2006 Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the then outstanding 2006
Notes (including consents obtained in connection with a tender offer or exchange
offer for such 2006 Notes), and any existing default or compliance with any
provision of the 2006 Note Indenture or 2006 Notes may be waived with the
consent of the holders of a majority in principal amount of the then outstanding
2006 Notes, including consents obtained in connection with a tender offer or
exchange offer for such 2006 Notes.
Without the consent of each holder affected, an amendment or waiver may
not, with respect to any 2006 Notes held by a non-consenting holder of 2006
Notes:
(1) reduce the amount of 2006 Notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any 2006
Note or alter the provisions with respect to the redemption of
the 2006 Notes, except for repurchases of the 2006 Notes pursuant
to the covenants described above under the captions "-- Asset
Sale" and "-- Change of Control";
(3) reduce the rate of or change the time for payment of interest on
any 2006 Note;
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(4) waive a default in the payment of principal of or interest on any
2006 Notes, except a rescission of acceleration of the 2006 Notes
by the holders of at least a majority in aggregate principal
amount of the 2006 Notes and a waiver of the payment default that
resulted from such acceleration;
(5) make any 2006 Note payable in money other than that stated in the
2006 Notes;
(6) make any change in the provisions of the 2006 Note Indenture
relating to waivers of past Defaults or the rights of holders of
2006 Notes to receive payments of principal of or interest on the
2006 Notes;
(7) waive a redemption payment with respect to any 2006 Note; or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of 2006
Notes, NTL and the 2006 Note Trustee may amend or supplement the 2006 Note
Indenture or 2006 Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated 2006 Notes in addition to or in place of certificated
2006 Notes, to provide for the assumption of NTL's obligations to holders of the
2006 Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the holders of the 2006 Notes
or that does not adversely affect the legal rights under the 2006 Note Indenture
of any such holder, or to comply with requirements of the SEC in order to
maintain the qualification of the 2006 Note Indenture under the Trust Indenture
Act.
Any notice or communication to a holder of 2006 Notes shall be mailed by
first-class mail to such holder's address as shown in the register kept by the
registrar. If a notice or communication is mailed in the manner provided in the
preceding sentence within the time period prescribed, it is duly given, whether
or not the addressee receives it. If the 2006 Notes are listed on the Luxembourg
Stock Exchange, NTL will publish a notice in a daily newspaper with general
circulation in Luxembourg.
GOVERNING LAW AND JUDGMENTS
The 2006 Notes and the 2006 Note Indenture will be governed exclusively by
the laws of the State of New York. Under the Judiciary Law of the State of New
York, a judgment or decree in an action based upon an obligation denominated in
a currency other than U.S. dollars will be rendered in the foreign currency of
the underlying obligation and converted into U.S. dollars at a rate of exchange
prevailing on the date of the entry of the judgment or decree.
CONCERNING THE 2006 NOTE TRUSTEE
The 2006 Note Indenture contains limitations on the rights of the 2006 Note
Trustee, should it become a creditor of NTL, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The 2006 Note Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
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The 2006 Note Indenture will provide that the holders of a majority in
principal amount of then outstanding 2006 Notes will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the 2006 Note Trustee under the 2006 Note Indenture, subject
to certain exceptions. The 2006 Note Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the 2006 Note Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. The 2006 Note Indenture will provide that
subject to such provisions, the 2006 Note Trustee will be under no obligation to
exercise any of its rights or powers under the 2006 Note Indenture at the
request of any holder of 2006 Notes, unless such holder shall have offered to
the 2006 Note Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
The Chase Manhattan Bank is also the trustee for all of the Existing Notes
and the Convertible Notes.
LISTING
Application has been made to list the 2006 Notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the 2006 Notes and the
articles of association of NTL will be registered prior to the listing with the
Registrar of the District Court in Luxembourg, where such documents are
available for inspection and where copies thereof can be obtained upon request.
In addition, if and as long as the 2006 Notes are listed on the Luxembourg Stock
Exchange, an agent for making payments on, and transfers of, 2006 Notes will be
maintained in Luxembourg. NTL has initially designated Chase Manhattan Bank
Luxembourg S.A. as its agent for such purposes.
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DESCRIPTION OF THE 2009 NOTES
GENERAL
The new 2009 Notes will be issued pursuant to an indenture, dated as of
November 24, 1999, the closing date, between NTL and The Chase Manhattan Bank,
as 2009 Note Trustee. The following summary of selected provisions of the 2009
Note Indenture is not complete and is qualified in its entirety by reference to
the 2009 Note Indenture, including the definitions therein of certain terms used
below. The definitions of certain terms used in the following summary are set
forth below under "-- Certain Definitions." In this "Description of the 2009
Notes," the term "NTL" refers to NTL Communications Corp. and not any of its
subsidiaries.
The 2009 Notes will be unsecured obligations of NTL, ranking equal in right
of payment with all senior unsecured Indebtedness of NTL and senior in right of
payment to all subordinated Indebtedness of NTL.
The operations of NTL are conducted through its subsidiaries. NTL is
dependent upon the cash flow of its subsidiaries to meet its obligations,
including its obligations under the 2009 Notes. As a result, the 2009 Notes will
be effectively subordinated to all existing and future indebtedness and other
liabilities and commitments of NTL's subsidiaries with respect to the cash flow
and assets of those subsidiaries.
Application has been made to list the 2009 Notes on the Luxembourg Stock
Exchange. The 2009 Notes are expected to be eligible for trading in the PORTAL
market.
PRINCIPAL, MATURITY AND INTEREST
From the date of issuance (the closing date), the 2009 Notes to be issued
in this exchange offer will be limited in aggregate principal amount to
E350,000,000. Up to an additional E150,000,000 aggregate principal amount of
2009 Notes (the "Additional Notes") may be issued at any time, subject to the
provisions of the 2009 Note Indenture described below under the caption
"Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock". If
the Additional Notes are issued more than one year after November 24, 1999, NTL
will prepare an updated listing memorandum to facilitate the listing of the
Additional Notes with the Luxembourg Stock Exchange. The 2009 Notes will accrue
interest at the rate of 9 7/8% per annum and will be payable in cash,
semi-annually in arrears, on May 15 and November 15 of each year, beginning on
May 15, 2000, to the holders of record on the immediately preceding May 1 and
November 1, respectively. Interest on the 2009 Notes will accrue from the date
of issuance, or the most recent date to which interest has been paid or duly
provided for.
Interest on overdue principal and to the extent permitted by law on overdue
installments of interest will accrue at a rate equal to the rate borne by the
2009 Notes. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. A reference to a payment of interest in respect of the
2009 Notes includes a payment of special interest, if any, and a reference to a
payment of principal includes a reference to a payment of premium, if any.
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The 2009 Notes will be payable both as to principal and interest on
presentation of such 2009 Notes if in certificated form at the offices or
agencies of NTL maintained for such purpose within the City and State of New
York or, at the option of NTL, payment of interest may be made by check mailed
to the holders of the 2009 Notes at their respective addresses set forth in the
register of holders of 2009 Notes or, if a holder so requests, by wire transfer
of immediately available funds to an account previously specified in writing by
such holder to NTL and the 2009 Note Trustee. Until otherwise designated by NTL,
NTL's office or agency in New York and London, respectively, will be the offices
of the 2009 Note Trustee maintained for such purpose. In addition, as described
under the caption "Listing," so long as the 2009 Notes are listed on the
Luxembourg Stock Exchange, an agent for making payments on, and transfers of,
2009 Notes will be maintained in Luxembourg. The 2009 Notes will be payable on
maturity on November 15, 2009 at 100% of their principal amount and will be
issued in registered form, without coupons, and in denominations of E1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
Except as referred to herein under "-- Covenants -- Additional Amounts;
Optional Tax Redemption," the 2009 Notes are not redeemable at NTL's option
prior to November 15, 2004. Thereafter, the 2009 Notes will be subject to
redemption at the option of NTL, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 104.938%
2005........................................................ 103.292%
2006........................................................ 101.646%
2007 and thereafter......................................... 100.000%
</TABLE>
In the case of a redemption of any class of 2009 Notes referred to herein
under "-- Covenants -- Additional Amounts; Optional Tax Redemption," redemption
of such 2009 Notes shall be made at the redemption prices specified in the 2009
Note Indenture plus accrued and unpaid interest, if any, to the applicable
redemption date.
MANDATORY REDEMPTION AND REPURCHASE
NTL is not required to make mandatory redemption or sinking fund payments
with respect to the 2009 Notes. NTL is required to make a Change of Control
Offer (as defined below) and an Asset Sale Offer (as defined below) with respect
to a repurchase of the 2009 Notes under the circumstances described under the
captions "Change of Control" and "Asset Sale," respectively.
CHANGE OF CONTROL
If a Change of Control Triggering Event occurs, each holder of 2009 Notes
shall have the right to require NTL to repurchase all or any part of such
holder's 2009 Notes equal to
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E1,000 or an integral multiple thereof pursuant to the offer described below
(the "Change of Control Offer") at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase. The payment shall be referred to as the Change of Control Payment.
Within 40 days following any Change of Control Triggering Event, NTL shall mail
a notice to each holder, and, if and as long as the 2009 Notes are listed on the
Luxembourg Stock Exchange, publish a notice in one leading newspaper with
circulation in Luxembourg, stating:
(1) that the Change of Control Offer is being made pursuant to the covenant
entitled "Change of Control" and that all 2009 Notes tendered will be accepted
for payment;
(2) the purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 40 days from the date such notice is mailed. This
date is referred to as the "Change of Control Payment Date";
(3) that any 2009 Notes not tendered will continue to accrue interest;
(4) that, unless NTL defaults in the payment of the Change of Control
Payment, all 2009 Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Payment Date;
(5) that holders electing to have any 2009 Notes purchased pursuant to a
Change of Control Offer will be required to surrender the 2009 Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the 2009
Notes completed, to the paying agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date;
(6) that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of 2009 Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such 2009 Notes purchased; and
(7) that holders whose 2009 Notes are being purchased only in part will be
issued new 2009 Notes equal in principal amount to the unpurchased portion of
the 2009 Notes surrendered, which unpurchased portion must be equal to E1,000 in
principal amount or an integral multiple of E1,000.
NTL will comply with the requirements of Rules 13e-4 and 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the 2009 Notes
in connection with a Change of Control Triggering Event.
On the Change of Control Payment Date, NTL will, to the extent lawful:
(1) accept for payment 2009 Notes or portions thereof tendered pursuant to
the Change of Control Offer;
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(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all 2009 Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the 2009 Note Trustee the 2009
Notes so accepted together with an Officers' Certificate stating the 2009 Notes
or portions of the 2009 Notes tendered to NTL.
The paying agent shall promptly mail to each holder of 2009 Notes so
accepted or, if such a holder requests, wire transfer immediately available
funds to an account previously specified in writing by such holder to NTL and
the paying agent, payment in an amount equal to the purchase price for such 2009
Notes, and, if such 2009 Notes are in certificated form, payment may be made at
the office of the paying agent in Luxembourg. The 2009 Note Trustee shall
promptly authenticate and mail to each holder a new 2009 Note equal in principal
amount to any unpurchased portion of the 2009 Notes surrendered, if any;
provided that each such new 2009 Note shall be in a principal amount of E1,000
or an integral multiple of E1,000. NTL will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control Triggering
Event, the 2009 Note Indenture does not contain any other provision that permits
the holders of the 2009 Notes to require that NTL repurchase or redeem the 2009
Notes in the event of a takeover, recapitalization or similar restructuring. The
2009 Note Indenture contains covenants which may afford holders of the 2009
Notes protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction, including the Change of Control
provision described above and the provisions described under "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" and "-- Merger, Consolidation or
Sale of Assets" below. Each of those covenants is, however, subject to
exceptions which may permit NTL to be involved in a highly leveraged transaction
that may adversely affect the holders of the 2009 Notes.
The Change of Control Offer requirement of the 2009 Notes may, in certain
circumstances, make more difficult or discourage a takeover of NTL, and, thus,
the removal of incumbent management. Management has not entered into any
agreement or plan involving a Change of Control, although it is possible that
NTL would decide to do so in the future. Subject to the limitations discussed
below, NTL could, in the future, enter into various transactions including
acquisitions, refinancings or other recapitalizations, that would not constitute
a Change of Control Triggering Event under the 2009 Note Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect NTL's capital structure or credit ratings.
The indentures for our other outstanding senior notes (including the 2006
Notes and the Deferred Coupon Notes) and convertible notes, also contain change
of control provisions.
NTL's ability to pay cash to the holders of 2009 Notes pursuant to a Change
of Control Offer may be limited by NTL's then existing financial resources. See
"Risk Factors -- Our substantial leverage could adversely affect our financial
health and prevent us from fulfilling our obligation under the notes" and "-- We
are a holding company that
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is dependent upon cash flow from our subsidiaries -- our ability to access that
cash flow may be limited in some circumstances". Any future credit agreements or
other agreements relating to indebtedness of NTL may, contain prohibitions or
restrictions on NTL's ability to effect a Change of Control Payment. In the
event a Change of Control Triggering Event occurs at a time when such
prohibitions or restrictions are in effect, NTL could seek the consent of its
lenders to the purchase of 2009 Notes and other Indebtedness containing change
of control provisions or could attempt to refinance the borrowings that contain
such prohibition. If NTL does not obtain such a consent or repay such
borrowings, NTL will be effectively prohibited from purchasing 2009 Notes. In
such case, NTL's failure to purchase tendered 2009 Notes would constitute an
Event of Default under the 2009 Note Indenture. Moreover, the events that
constitute a Change of Control or require an Asset Sale Offer under the 2009
Note Indenture may also constitute events of default under future debt
instruments or credit agreements of NTL or NTL's Subsidiaries. Such events of
default may permit the lenders under such debt instruments or credit agreements
to accelerate the debt and, if such debt is not paid or repurchased, to enforce
their security interests in what may be all or substantially all of the assets
of NTL's Subsidiaries. Any such enforcement may limit NTL's ability to raise
cash to repay or repurchase the 2009 Notes.
NTL will not be required to make a Change of Control Offer in the event NTL
enters into a transaction with management or their affiliates who are Permitted
Holders. The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of NTL's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of 2009 Notes to require NTL to repurchase such 2009 Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of the
assets of NTL and its Subsidiaries to another Person may be uncertain.
ASSET SALE
The 2009 Note Indenture provides that NTL will not and will not permit any
of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale,
unless:
(1) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale;
(2) NTL, or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced for purposes of this covenant by a
resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the 2009 Note Trustee) of the assets sold
or otherwise disposed of; and
(3) at least 80% of the consideration therefor received by NTL or such
Restricted Subsidiary is in the form of:
(a) Cash Equivalents;
(b) Replacement Assets;
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(c) publicly traded Equity Interests of a Person who is, directly
or indirectly, engaged primarily in one or more Cable
Businesses; provided, however, that NTL or the Restricted
Subsidiary shall Monetize the Equity Interests by sale to one
or more Persons (other than to NTL or a Subsidiary thereof)
at a price not less than the fair market value thereof within
180 days of the consummation of the Asset Sale; or
(d) any combination of the foregoing clauses (a) through (c);
provided, however, that the amount of:
(x) any liabilities, as shown on NTL's or the Restricted
Subsidiary's most recent balance sheet or in the notes
thereto, of NTL or any Restricted Subsidiary, other than
liabilities that are by their terms subordinated to the
2009 Notes, that are assumed by the transferee of any
such assets; and
(y) any notes or other obligations received by NTL or any
Restricted Subsidiary from such transferee that are
within five Business Days converted by NTL or the
Restricted Subsidiary into cash, shall be deemed to be
Cash Equivalents, to the extent of the Cash Equivalents
received in such conversion, for purposes of this clause
(3).
Within 360 days after any Asset Sale, NTL, or the Restricted Subsidiary, as
the case may be, will cause the Net Proceeds from the Asset Sale:
(1) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary; or
(2) to be invested or reinvested in Replacement Assets.
Pending final application of the Net Proceeds, NTL may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the 2009 Note Indenture.
Any Net Proceeds from any Asset Sale that are not used or reinvested as
provided in the preceding sentence constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $15.0 million, NTL will make an
Asset Sale Offer to all holders of 2009 Notes and Other Qualified Notes to
purchase the maximum principal amount of 2009 Notes and Other Qualified Notes,
determined on a pro rata basis according to the Accreted Value or principal
amount, as the case may be, of the 2009 Notes and the Other Qualified Notes that
may be purchased out of the Excess Proceeds:
(1) with respect to the Other Qualified Notes, based on the terms set
forth in the indenture related to each issue of the Other
Qualified Notes; and
(2) with respect to the 2009 Notes, at an offer price in cash in an
amount equal to 100% of the outstanding principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set
forth in the 2009 Note Indenture.
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To the extent that the aggregate principal amount or Accreted Value, as the
case may be, of 2009 Notes and Other Qualified Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, NTL may use such deficiency
for general corporate purposes. If the aggregate principal amount or Accreted
Value, as the case may be, of 2009 Notes and Other Qualified Notes surrendered
by holders thereof exceeds the amount of Excess Proceeds then the remaining
Excess Proceeds will be allocated pro rata according to Accreted Value or
principal amount, as the case may be, to the 2009 Notes and each issue of the
Other Qualified Notes, and the 2009 Note Trustee will select the 2009 Notes to
be purchased from the amount allocated to the 2009 Notes on the basis set forth
under "Selection and Notice" below. Upon completion of such offers to purchase
each of the 2009 Notes and the Other Qualified Notes, the amount of Excess
Proceeds will be reset at zero.
Notwithstanding the foregoing, NTL and its Subsidiaries may:
(1) sell, lease, transfer, convey or otherwise dispose of assets or
property acquired after October 14, 1993, by NTL or any
Subsidiary in a sale-and-leaseback transaction so long as the
proceeds of such sale are applied within five Business Days to
permanently reduce Indebtedness of a Restricted Subsidiary or if
there is no such Indebtedness or such proceeds exceed the amount
of such Indebtedness then such proceeds or excess proceeds are
reinvested in Replacement Assets within 360 days after such sale,
lease, transfer, conveyance or disposition;
(2) (x) swap or exchange assets or property with a Cable Controlled
Subsidiary; or
(y) issue, sell, lease, transfer, convey or otherwise dispose
of equity securities of any of NTL's Subsidiaries to a
Cable Controlled Subsidiary, in each of cases (x) and (y)
so long as
(A) the ratio of Indebtedness to Annualized Pro Forma EBITDA
of NTL after such transaction is equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA
of NTL immediately preceding such transaction; provided,
however, that if the ratio of Indebtedness to Annualized
Pro Forma EBITDA of NTL immediately preceding such
transaction is 6:1 or less, then the ratio of
Indebtedness to Annualized Pro Forma EBITDA of NTL may
be 0.5 greater than such ratio immediately preceding
such transaction; and
(B) either:
(I) the assets so contributed consist solely of a
license to operate a Cable Business and the Net
Households covered by all of the licenses to
operate cable and telephone systems held by NTL and
its Restricted Subsidiaries immediately after and
giving effect to such transaction equals or exceeds
the number of Net Households covered by all of the
licenses to operate
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cable and telephone systems held by NTL and its
Restricted Subsidiaries immediately prior to such
transaction; or
(II) the assets so contributed consist solely of Cable
Assets and the value of the Capital Stock
received, immediately after and giving effect to
such transaction, as determined by an investment
banking firm of recognized standing with knowledge
of the Cable Business, equals or exceeds the value
of the Cable Assets exchanged for such Capital
Stock; or
(3) issue, sell, lease, transfer, convey or otherwise dispose of
Equity Interests of NTL, or any Capital Stock Sales Proceeds
therefrom, to any Person including Non-Restricted Subsidiaries.
SELECTION AND NOTICE
If less than all of the 2009 Notes are to be redeemed at any time,
selection of 2009 Notes for redemption will be made by the 2009 Note Trustee in
compliance with the requirements of any securities exchange on which the 2009
Notes are listed. In the absence of any requirements of any securities exchange
or if the 2009 Notes are not so listed, selection of the 2006 Notes to be
redeemed will be made on a pro rata basis, provided that no 2009 Notes of E1,000
or less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of 2009 Notes to be redeemed at its registered address. If any 2009
Note is to be redeemed in part only, the notice of redemption that relates to
such 2009 Note shall state the portion of the principal amount thereof to be
redeemed. A new 2009 Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original 2009 Note. On and after the redemption date, interest ceases to
accrue on 2009 Notes or portions of them called for redemption.
If the 2009 Notes are listed on the Luxembourg Stock Exchange, NTL will
publish a redemption notice in a daily newspaper with general circulation in
Luxembourg.
COVENANTS
RESTRICTED PAYMENTS
The 2009 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution on account
of NTL's or any of its Restricted Subsidiaries' Equity
Interests, other than:
(x) dividends or distributions payable in Equity Interests,
other than Disqualified Stock, of NTL or such Restricted
Subsidiary;
(y) dividends or distributions payable to NTL or any Wholly
Owned Subsidiary of NTL; or
(z) pro rata dividends or pro rata distributions payable by a
Restricted Subsidiary;
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(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of NTL, other than any such Equity Interests
owned by NTL or any Wholly Owned Subsidiary of NTL;
(3) voluntarily purchase, redeem or otherwise acquire or retire for
value any Indebtedness that is subordinated to the 2009 Notes;
or
(4) make any Restricted Investment.
All such payments and other actions set forth in clauses (1) through (4)
above are collectively referred to as Restricted Payments.
NTL or the Restricted Subsidiary may make a Restricted Payment if, at the
time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by NTL and its Restricted
Subsidiaries after the Issuance Date, including Restricted
Payments permitted by clauses (2) through (10) of the next
succeeding paragraph, is less than the sum of:
(x) the difference between Cumulative EBITDA and 1.5
times Cumulative Interest Expense; plus
(y) Capital Stock Sale Proceeds; plus:
(z) cash received by NTL or a Restricted Subsidiary from
a Non-Restricted Subsidiary (other than cash which is
or is required to be repaid or returned to such
Non-Restricted Subsidiary); provided, however, that
to the extent that any Restricted Investment that was
made after the date of the 2009 Note Indenture is
sold for cash or otherwise liquidated or repaid for
cash, the amount credited pursuant to this clause (z)
shall be the lesser of:
(A) the cash received with respect to such sale,
liquidation or repayment of such Restricted
Investment, less the cost of such sale,
liquidation or repayment, if any; and
(B) the initial amount of such Restricted Investment,
in each case as determined in good faith by NTL's
Board of Directors.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the 2009 Note
Indenture;
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(2) (x) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of NTL or any Restricted
Subsidiary; or
(y) an Investment in any Person;
in each case, in exchange for, or out of the proceeds of, the
substantially concurrent sale, other than to a Restricted
Subsidiary of NTL, of other Equity Interests other than any
Disqualified Stock) of NTL provided that NTL delivers to the 2009
Note Trustee:
(A) with respect to any transaction involving in excess
of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate
certifying that such transaction is approved by a
majority of the directors on the Board of Directors;
and
(B) with respect to any transaction involving in excess
of $25.0 million, an opinion as to the fairness to
NTL or the Restricted Subsidiary from a financial
point of view issued by an investment banking firm of
national standing with high yield experience,
together with an Officers' Certificate to the effect
that such opinion complies with this clause (2);
(3) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which:
(A) has no Indebtedness on a consolidated basis other than
Indebtedness incurred to finance the purchase of equipment
used in a Cable Business;
(B) has no restrictions (other than restrictions imposed or
permitted by the 2009 Note Indenture or the indentures
governing the Other Qualified Notes or any other instrument
governing unsecured indebtedness of NTL which is pari passu
with the 2009 Notes) on its ability to pay dividends or make
any other distributions to NTL or any of its Restricted
Subsidiaries;
(C) is or will be a Cable Business; and
(D) uses the proceeds of such Investment for constructing a
Cable Business or the working capital needs of a Cable
Business;
(4) the redemption, purchase, defeasance, acquisition or retirement
of Indebtedness that is subordinated to the 2009 Notes (including
premium, if any, and accrued and unpaid interest) made by
exchange for, or out of the proceeds of the substantially
concurrent sale, other than to a Restricted Subsidiary of NTL,
of:
(A) Equity Interests of NTL; or
(B) Refinancing Indebtedness permitted to be incurred under the
"Incurrence of indebtedness and issuance of preferred stock"
covenant;
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(5) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which is or will be a Cable Business in
an amount not to exceed $100.0 million in the aggregate plus the
sum of:
(A) cash received by NTL or a Restricted Subsidiary from a Non-
Restricted Subsidiary (other than cash which is or is
required to be repaid or returned to such Non-Restricted
Subsidiary); and
(B) Capital Stock Sale Proceeds, excluding the aggregate net
sale proceeds to be received upon conversion of the
Convertible Subordinated Notes;
(6) Investments by NTL or any Restricted Subsidiary in Permitted
Non-Controlled Assets;
(7) Investments by NTL or any Restricted Subsidiary in SDN Limited,
a joint venture organized to operate a digital terrestrial
television multiplex, in an amount not exceeding L11.4 million;
(8) the extension by NTL or any Restricted Subsidiary of trade
credit to a Non-Restricted Subsidiary extended on usual and
customary terms in the ordinary course of business, provided
that the aggregate amount of such trade credit shall not exceed
$25.0 million at any one time;
(9) the payment of cash dividends on the Preferred Stock accruing on
or after February 15, 2004 or any mandatory redemption or
repurchase of the Preferred Stock, in each case, in accordance
with the Certificate of Designations therefor; and
(10) the exchange of all of the outstanding shares of Preferred Stock
for Subordinated Debentures in accordance with the Certificate
of Designation for the Preferred Stock.
Any Investment in a Subsidiary, other than the issuance, transfer or other
conveyance of Equity Interests of NTL or any Capital Stock Sales Proceeds
therefrom, that is designated by the Board of Directors as a Non-Restricted
Subsidiary shall become a Restricted Payment made on the date of such
designation in the amount of the greater of:
(x) the book value of such Subsidiary on the date such Subsidiary
becomes a Non-Restricted Subsidiary; and
(y) the fair market value of such Subsidiary on such date as
determined:
(A) in good faith by the Board of Directors of such Subsidiary
if such fair market value is determined to be less than
$25.0 million; and
(B) by an investment banking firm of national standing with high
yield underwriting expertise if such fair market value is
determined to be in excess of $25.0 million.
Not later than the fifth Business Day after making any Restricted Payment
(other than those referred to in sub-clause (8) of the second paragraph
preceding this paragraph), NTL shall deliver to the 2009 Note Trustee an
Officers' Certificate stating that such Restricted
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Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which calculations
may be based upon NTL's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The 2009 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable with respect
to any Indebtedness, including Acquired Debt, and that NTL will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock that is Disqualified Stock; provided,
however, that NTL may incur Indebtedness or issue shares of Disqualified Stock
and any of its Restricted Subsidiaries may issue shares of preferred stock that
is Disqualified Stock if after giving effect to such issuance or incurrence on a
pro forma basis, the sum of:
(x) Indebtedness of NTL and its Restricted Subsidiaries, on a
consolidated basis;
(y) the liquidation value of outstanding preferred stock of
Restricted Subsidiaries; and
(z) the aggregate amount payable by NTL and its Restricted
Subsidiaries, on a consolidated basis, upon redemption of
Disqualified Stock to the extent such amount is not included in
the preceding clause (y) shall be less than the product of
Annualized Pro Forma EBITDA for the latest fiscal quarter for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock or preferred stock is issued
multiplied by 7.0, determined on a pro forma basis, including a
pro forma application of the net proceeds therefrom, as if the
additional Indebtedness had been incurred, or the Disqualified
Stock or preferred stock had been issued, as the case may be, at
the beginning of such quarter.
The foregoing limitations will not apply to:
(a) the incurrence by NTL or any Restricted Subsidiary of
Indebtedness pursuant to the Credit Facility;
(b) the issuance by any Restricted Subsidiary of preferred stock
(other than Disqualified Stock) to NTL, any Restricted Subsidiary
of NTL or the holders of Equity Interests in any Restricted
Subsidiary on a pro rata basis to such holders;
(c) the incurrence of Indebtedness or the issuance of preferred stock
by NTL or any of its Restricted Subsidiaries the proceeds of
which are (or the credit support provided by any such
Indebtedness is), in each case, used to finance the construction,
capital expenditure and working capital needs of a Cable Business
(including, without limitation, payments made pursuant to any
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License), the acquisition of Cable Assets or the Capital Stock of
a Qualified Subsidiary;
(d) the incurrence by NTL or any of its Restricted Subsidiaries of
additional Indebtedness in an outstanding aggregate principal
amount not to exceed $100.0 million at any time;
(e) the incurrence by NTL or any Restricted Subsidiary of any
Permitted Acquired Debt;
(f) the incurrence by NTL or any Subsidiary of Indebtedness issued in
exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, or refund the 2006 Notes, the 2009
Notes or the Deferred Coupon Notes issued in this offering,
Existing Indebtedness or Indebtedness referred to in clauses (a),
(b), (c), (d) or (e) above or Indebtedness incurred pursuant to
the preceding paragraph (the "Refinancing Indebtedness");
provided, however, that:
(1) the principal amount of, and any premium payable in respect
of, such Refinancing Indebtedness shall not exceed the
principal amount of Indebtedness so extended, refinanced,
renewed, replaced or refunded (plus the amount of reasonable
expenses incurred in connection therewith);
(2) the Refinancing Indebtedness shall have:
(A) a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed,
replaced or refunded; and
(B) a stated maturity no earlier than the stated maturity
of, the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and
(3) the Refinancing Indebtedness shall be subordinated in right
of payment to the 2009 Notes as and to the extent of the
Indebtedness being extended, refinanced, renewed, replaced
or refunded;
(g) the issuance of the Preferred Stock in lieu of payment of cash
interest on the Subordinated Debentures or the incurrence by NTL
of Indebtedness represented by the Subordinated Debentures upon
the exchange of the Preferred Stock in accordance with the
Certificate of Designations therefor;
(h) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts are related to payment obligations under
Existing Indebtedness or Indebtedness incurred under this
paragraph or the preceding paragraph that are being hedged
thereby, and not for speculation and that the aggregate notional
amount under each such Exchange Rate Contract does not exceed the
aggregate payment obligations under such Indebtedness;
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(i) Indebtedness under Interest Rate Agreements, provided that the
obligations under such agreements are related to payment
obligations on Existing Indebtedness or Indebtedness otherwise
incurred pursuant to this paragraph or the preceding paragraph,
and not for speculation;
(j) the incurrence of Indebtedness between NTL and any Restricted
Subsidiary, between or among Restricted Subsidiaries and between
any Restricted Subsidiary and other holders of Equity Interests
of such Restricted Subsidiary (or other Persons providing funding
on their behalf) on a pro rata basis and on substantially
identical principal financial terms, provided, however, that if
any such Restricted Subsidiary that is the payee of any such
Indebtedness ceases to be a Restricted Subsidiary or transfers
such Indebtedness (other than to NTL or a Restricted Subsidiary
of NTL), such events shall be deemed, in each case, to constitute
the incurrence of such Indebtedness by NTL or by a Restricted
Subsidiary, as the case may be, at the time of such event; and
(k) Indebtedness of NTL and/or any Restricted Subsidiary in respect
of performance bonds of NTL or any Subsidiary or surety bonds
provided by NTL or any Restricted Subsidiary received in the
ordinary course of business in connection with the construction
or operation of a Cable Business.
Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary
shall be deemed for purposes of the foregoing covenant to be an incurrence of
Indebtedness by NTL and its Restricted Subsidiaries of the Indebtedness of such
Non-Restricted Subsidiary as of the time of such redesignation to the extent
such Indebtedness does not already constitute Indebtedness of NTL or one of its
Restricted Subsidiaries.
LIENS
The 2009 Note Indenture provides that neither NTL nor any of its Restricted
Subsidiaries may directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except:
(1) Permitted Liens;
(2) Liens securing Indebtedness and related obligations incurred
under clauses (a), (b), (c), (d), (e), (h), (i) and (k) of the
second paragraph of the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant;
(3) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant; and
(4) Liens securing Refinancing Indebtedness permitted to be incurred
under the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; provided that the Refinancing Indebtedness so
issued and secured by such
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Lien shall not be secured by any property or assets of NTL or any
of its Restricted Subsidiaries other than the property or assets
subject to the Liens securing such Indebtedness being refinanced.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The 2009 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to NTL or any
of its Subsidiaries:
(A) on its Capital Stock; or
(B) with respect to any other interest or participation in,
or measured by, its profits; or
(b) pay any indebtedness owed to NTL or any of its Subsidiaries;
or
(2) make loans or advances to NTL or any of its Subsidiaries; or
(3) transfer any of its properties or assets to NTL or any of its
Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(a) Existing Indebtedness as in effect on the Issuance Date;
(b) the indentures relating to the 2006 Notes, 2009 Notes and
the Deferred Coupon Notes;
(c) any agreement covering or relating to Indebtedness permitted
to be incurred under clause (a), (b), (c), (d), (e), (h) or
(i) (but only, in the case of clause (h) or (i), to the
extent contemplated by the then-existing Credit Facility) of
the second paragraph of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, provided that the
provisions of such agreement permit any action referred to
in clause (a) above in aggregate amounts sufficient to
enable the payment of interest and principal and mandatory
repurchases pursuant to the terms of the 2009 Note Indenture
and the 2009 Notes but provided further that:
(x) any such agreement may nevertheless encumber,
prohibit or restrict any action referred to in clause
(a) above if an event of default under such agreement
has occurred and is continuing or would occur as a
result of any such action; and
(y) any such agreement may nevertheless contain:
(I) restrictions limiting the payment of dividends
or the making of any other distributions to
all or a portion of excess cash-flow (or any
similar formulation thereof); and
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(II) subordination provisions governing
Indebtedness owed to NTL or any Restricted
Subsidiary;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a
Person acquired by NTL or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with such acquisition),
which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired; provided
that the EBITDA of such Person is not taken into account in
determining whether such acquisition was permitted by the terms
of the 2009 Note Indenture;
(6) customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) provisions of joint venture or stockholder agreements, so long as
such provisions are determined by a resolution of the Board of
Directors to be, at the time of such determination, customary for
such agreements;
(8) with respect to clause (c) above, purchase money obligations for
property acquired in the ordinary course of business or the
provisions of any agreement with respect to any Asset Sale (or
transaction which, but for its size, would be an Asset Sale),
solely with respect to the assets being sold; or
(9) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such
Refinancing Indebtedness are determined by a resolution of the
Board of Directors to be no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The 2009 Note Indenture provides that NTL may not consolidate or merge with
or into, whether or not NTL is the surviving corporation, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
(1) NTL is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger, if other
than NTL, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or
the Cayman Islands or of the United States, any state thereof or
the District of Columbia;
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(2) the entity or Person formed by or surviving any such
consolidation or merger, if other than NTL, or the entity or
Person to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all
the Obligations, including the due and punctual payment of
Additional Amounts as defined in the 2009 Note Indenture if the
surviving corporation is a corporation organized or existing
under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, of NTL,
pursuant to a supplemental indenture in a form reasonably
satisfactory to the 2009 Note Trustee, under the 2009 Notes and
the 2009 Note Indenture;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) NTL or any entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been
made will have a ratio of Indebtedness to Annualized Pro Forma
EBITDA equal to or less than the ratio of Indebtedness to
Annualized Pro Forma EBITDA of NTL immediately preceding the
transaction provided, however, that if the ratio of Indebtedness
to Annualized Pro Forma EBITDA of NTL immediately preceding such
transaction is 6:1 or less, then the ratio of Indebtedness to
Annualized Pro Forma EBITDA of NTL may be 0.5 greater than such
ratio immediately preceding such transaction; and
(5) such transaction would not result in the loss of any material
authorization or Material License of NTL or its Subsidiaries.
ADDITIONAL AMOUNTS; OPTIONAL TAX REDEMPTION
The 2009 Note Indenture provides that the "Payment of Additional Amounts"
provision in the 2009 Note Indenture, relating to United Kingdom, Netherlands,
Netherlands Antilles, Bermuda and Cayman Islands withholding and other United
Kingdom, Netherlands, Netherlands Antilles, Bermuda and Cayman Islands taxes,
and the "Optional Tax Redemption" provision in the 2009 Note Indenture relating
to NTL's option to redeem the 2009 Notes under specified circumstances if
Additional Amounts are payable, apply to the 2009 Notes in specified
circumstances. The provisions of the 2009 Note Indenture relating to the payment
of Additional Amounts will only apply in the event that NTL becomes, or a
successor to NTL is, a corporation organized or existing under the laws of the
United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands. In such circumstances, all payments made by NTL on the 2009 Notes will
be made without deduction or withholding, for or on account of, any and all
present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law. If any deduction or
withholding for or on account of any present or future taxes, assessments or
other governmental charges of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, or any political
subdivision or taxing authority thereof or therein, shall at any time be
required in respect of any amounts
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to be paid by NTL under the 2009 Notes, NTL will pay or cause to be paid such
additional amounts ("Additional Amounts") as may be necessary in order that the
net amounts received by a holder of the 2009 Notes after such deduction or
withholding shall be not less than the amounts specified in the 2009 Notes to
which the holder of such 2009 Notes is entitled; provided, however, that NTL
shall not be required to make any payment of Additional Amounts for or on
account of:
(1) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have
been imposed but for:
(a) the existence of any present or former connection between
such holder, or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, nominee, trust,
partnership or corporation, other than the holding of the
2009 Notes or the receipt of amounts payable in respect of
the 2009 Notes and the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands or any
political subdivision or taxing authority thereof or
therein, including, without limitation, such holder or such
fiduciary, settlor, beneficiary, member, shareholder or
possessor, being or having been a citizen or resident
thereof or being or having been present or engaged in trade
or business therein or having had a permanent establishment
therein; or
(b) the presentation of the 2009 Notes, where presentation is
required, for payment on a date more than 30 days after the
date on which such payment became due and payable or the
date on which payment thereof is duly provided for,
whichever occurs later, except to the extent that the holder
would have been entitled to Additional Amounts had the 2009
Notes been presented on the last day of such period of 30
days;
(2) any governmental charge that is imposed or withheld by reason of
the failure to comply by the holder of the 2009 Notes or, if
different, the beneficial owner of the interest payable on the
2009 Notes, with a timely request of NTL addressed to such holder
or beneficial owner to provide information, documents or other
evidence concerning the nationality, identity or connection with
the taxing jurisdiction of such holder or beneficial owner which
is required or imposed by a statute, regulation or administrative
practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax assessment or governmental
charge;
(3) any estate, inheritance, gift, sales, transfer, personal property
or similar tax assessment or other governmental charge;
(4) any tax assessment or other governmental charge which is
collectible otherwise than by withholding from payments of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a
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2009 Note or withholding from the proceeds of a sale or exchange
of a 2009 Note;
(5) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal
amount, redemption amount, Change of Control Payment or interest
with respect to a 2009 Note, if such payment can be made, and is
in fact made, without such withholding by any other paying agent
located inside the United States;
(6) any tax, assessment or other governmental charge imposed on a
holder that is not the beneficial owner of a 2009 Note to the
extent that the beneficial owner would not have been entitled to
the payment of any such Additional Amounts had the beneficial
owner directly held the 2009 Note; or
(7) any combination of items (1), (2), (3), (4), (5) and (6) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on the 2009 Notes to any holder who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the holder of the 2009
Notes.
The 2009 Notes may be redeemed at the option of NTL, in whole but not in
part, upon not less than 30 nor more than 60 days notice, at any time upon the
circumstances set forth below. The redemption price will be equal to the
principal amount thereof plus accrued and unpaid interest to the date fixed for
redemption if after the Issuance Date there has occurred any change in or
amendment to the laws or any regulations or official rulings promulgated
thereunder of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands, or any political subdivision or taxing authority
thereof or therein, or any change in or amendment to the official application or
interpretation of such laws, regulation or rulings which becomes effective after
the Issuance Date, as a result of which NTL is or would be so required on the
next succeeding Interest Payment Date to pay Additional Amounts with respect to
the 2009 Notes with respect to withholding taxes imposed by the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, or any
political subdivision or taxing authority thereof or therein, a "Withholding
Tax" and such Withholding Tax is imposed at a rate that exceeds the rate (if
any) at which any Withholding Tax was imposed on the Issuance Date provided
that:
(1) this paragraph shall not apply to the extent that, at the
Relevant Date, it was known or would have been known had
professional advice of a nationally recognized accounting firm in
the United Kingdom, Netherlands, Netherlands Antilles, Bermuda or
the Cayman Islands, as the case may be, been sought, that a
Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, was to occur
after the Issuance Date;
(2) no such notice of redemption may be given earlier than 90 days
prior to the earliest date on which NTL would be obliged to pay
such Additional Amounts were a payment in respect of the 2009
Notes then due;
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(3) at the time such notice of redemption is given, such obligation
to pay such Additional Amount remains in effect; and
(4) the payment of such Additional Amounts cannot be avoided by the
use of any reasonable measures available to NTL.
The 2009 Notes may also be redeemed, in whole but not in part, at any time
upon the circumstances set forth below. The redemption price will be equal to
the principal amount of the 2009 Notes plus accrued and unpaid interest to the
date fixed for redemption if the person formed after the Issuance Date by a
consolidation, amalgamation, reorganization, reconstruction or other similar
arrangement of NTL or the person into which NTL is merged after the Issuance
Date or to which NTL conveys, transfers or leases its properties and assets
after the Issuance substantially as an entirety (collectively, a "Subsequent
Consolidation") is required, as a consequence of such Subsequent Consolidation
and as a consequence of a Change in Tax Law in the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring
after the date of such Subsequent Consolidation to pay Additional Amounts with
respect to 2009 Notes with respect to Withholding Tax and such Withholding Tax
is imposed at a rate that exceeds the rate, if any, at which Withholding Tax was
or would have been imposed on the date of such Subsequent Consolidation. This
paragraph shall not apply to the extent that, at the date of such Subsequent
Consolidation it was known or would have been known had professional advice of a
nationally recognized accounting firm in the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be,
been sought, that a Change in Tax Law in the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands, was to occur after such
date.
NTL will also pay, or make available for payment, to holders on the
redemption date any Additional Amounts resulting from the payment of such
redemption price.
TRANSACTIONS WITH AFFILIATES
The 2009 Note Indenture provides that NTL will not, and will not permit any
of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to NTL or the relevant Subsidiary than those that could have been
obtained in a comparable transaction by NTL or such Subsidiary
with an unrelated Person; and
(2) NTL delivers to the 2009 Note Trustee:
(a) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1.0 million or any series
of Affiliate Transactions with an Affiliate involving
aggregate payments in excess of $1.0 million, a resolution
of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction
complies with clause (1) above
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and such Affiliate Transaction is approved by a majority of
the disinterested directors on the Board of Directors; and
(b) with respect to any Affiliate Transaction or any series of
Affiliate Transactions involving aggregate payments in
excess of $25.0 million, an opinion as to the fairness to
NTL or such Subsidiary from a financial point of view issued
by an investment banking firm of national standing with high
yield experience together with an Officers' Certificate to
the effect that such opinion complies with this clause (b);
provided, however, that notwithstanding the foregoing provisions,
the following shall not be deemed to be Affiliate Transactions:
(1) any employment agreement entered into by NTL or any of its
Subsidiaries in the ordinary course of business and consistent
with the past practice of NTL or its predecessor or such
Subsidiary;
(2) transactions between or among NTL and/or its Restricted
Subsidiaries;
(3) transactions permitted by the provisions of the 2009 Note
Indenture described above under the covenant "Restricted
Payments";
(4) Liens permitted under the Liens covenant which are granted by NTL
or any of its Subsidiaries to an unrelated Person for the benefit
of NTL or any other Subsidiary of NTL;
(5) any transaction pursuant to an agreement in effect on the
Issuance Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary where
such Indebtedness is owed to the holders of the Equity Interests
of such Restricted Subsidiary on a pro rata basis and on
substantially identical principal financial terms;
(7) management, operating, service or interconnect agreements entered
into in the ordinary course of business with any Cable Business
in which NTL or any Restricted Subsidiary has an Investment and
which is not a Cable Controlled Subsidiary, and of which no
Affiliate of NTL is an Affiliate other than as a result of such
Investment; and
(8) any tax sharing agreement.
REPORTS
Whether or not required by the rules and regulations of the SEC, so long as
any 2009 Notes are outstanding, NTL will file with the SEC and furnish to the
holders of 2009 Notes all quarterly and annual financial information required to
be contained in a filing with the SEC on Forms 10-Q and 10-K, or the equivalent
of those reports under the Exchange Act for foreign private issuers in the event
NTL becomes a corporation organized under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, including
a "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a
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report by NTL's certified independent accountants, in each case, as required by
the rules and regulations of the SEC as in effect on the Issuance Date. NTL does
not publish unconsolidated financial reports.
EVENTS OF DEFAULT AND REMEDIES
The 2009 Note Indenture provides that each of the following constitutes an
Event of Default:
(1) default for 30 days in the payment when due of interest and
Additional Amounts, if applicable, on the 2009 Notes;
(2) default in payment when due of principal on the 2009 Notes;
(3) failure by NTL to comply with the provisions described under the
covenants "Change of Control," "Restricted Payments" or
"Incurrence of Indebtedness and Issuance of Preferred Stock";
(4) failure by NTL for 60 days after notice to comply with certain
other covenants and agreements contained in the 2009 Note
Indenture or the 2009 Notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by NTL or any of its
Restricted Subsidiaries, or the payment of which is guaranteed by
NTL or any of its Restricted Subsidiaries, whether such
Indebtedness or guarantee now exists, or is created after the
Issuance Date, which default:
(a) is caused by a failure to pay when due principal or interest
on such Indebtedness within the grace period provided in
such Indebtedness, which Payment Default continues beyond
any applicable grace period; or
(b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount
of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by NTL or any Restricted Subsidiary of NTL to pay final
judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in
excess of $5.0 million, which judgments are not stayed within 60
days after their entry;
(7) certain events of bankruptcy or insolvency with respect to NTL or
any of its Material Subsidiaries; and
(8) the revocation of a Material License.
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If any Event of Default occurs and is continuing, the 2009 Note Trustee or
the holders of at least 25% in principal amount of then outstanding 2009 Notes
may declare all the 2009 Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to NTL or any Material
Subsidiary, all outstanding 2009 Notes will become due and payable without
further action or notice. Holders of the 2009 Notes may not enforce the 2009
Note Indenture or the 2009 Notes except as provided in the 2009 Note Indenture.
Subject to certain limitations, holders of a majority in principal amount of
outstanding 2009 Notes may direct the 2009 Note Trustee in its exercise of any
trust or power. The 2009 Note Trustee may withhold from holders of the 2009
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of each class of
2009 Notes then outstanding by notice to the 2009 Note Trustee may on behalf of
the holders of all of the applicable class of 2009 Notes waive any existing
Default or Event of Default and its consequences under the 2009 Note Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the 2009 Notes.
NTL is required to deliver to the 2009 Note Trustee annually a statement
regarding compliance with the 2009 Note Indenture, and NTL is required, upon
becoming aware of any Default or Event of Default, to deliver to the 2009 Note
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of NTL, as
such, shall have any liability for any Obligations of NTL under the 2009 Notes
or the 2009 Note Indenture or for any claim based on, in respect of, or by
reason of, such Obligations or their creation. Each holder of the 2009 Notes by
accepting a 2009 Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the 2009 Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws, and it is the view of the SEC that a waiver of such liabilities is against
public policy.
DEFEASANCE AND DISCHARGE OF THE 2009 NOTE INDENTURE AND THE 2009 NOTES
NTL may cause the defeasance of the 2009 Notes if NTL irrevocably deposits,
or causes to be deposited, in trust with the 2009 Note Trustee or the paying
agent, at any time prior to the stated maturity of the 2009 Notes or the date of
redemption of all the outstanding 2009 Notes, as trust funds in trust, money or
direct noncallable obligations of or guaranteed by the United States of America
in an amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants, without reinvestment thereof, to pay timely and
discharge the entire principal of the then outstanding 2009 Notes of such class
and all interest due thereon to maturity or redemption. The 2009 Note Indenture
will
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then cease to be of further effect as to all outstanding 2009 Notes except,
among other things, as to:
(1) remaining rights of registration of transfer and substitution and
exchange of the 2009 Notes of such class;
(2) rights of holders to receive payment of principal of and interest
on the 2009 Notes; and
(3) the rights, obligations and immunities of the 2009 Note Trustee.
In order to exercise Defeasance:
(1) NTL shall have delivered to the 2009 Note Trustee an Opinion of
Counsel reasonably acceptable to the 2009 Note Trustee confirming
that:
(a) NTL has received from, or there has been published by, the
Internal Revenue Service, a ruling; or
(b) since the date of the 2009 Note Indenture, there has been a
change in the applicable federal income tax law, in either
case to the effect that, and based thereon, such Opinion of
Counsel shall confirm that the holders of the outstanding
2009 Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Defeasance
and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would
have been the case if such Defeasance had not occurred;
(2) no Event of Default shall have occurred and be continuing on the
date of such deposit (other than an Event of Default resulting
from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(3) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument
(other than the 2009 Note Indenture) to which NTL or any of its
Subsidiaries is a party or by which NTL or any of its
Subsidiaries is bound;
(4) NTL shall have delivered to the 2009 Note Trustee an Opinion of
Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(5) NTL shall have delivered to the 2009 Note Trustee an Officers'
Certificate stating that the deposit was not made by NTL with the
intent of preferring the holders of 2009 Notes over the other
creditors of NTL with the intent of defeating, hindering,
delaying or defrauding creditors of NTL or others;
(6) the deposit shall not result in NTL, the 2009 Note Trustee or the
trust being subject to the Investment Company Act of 1940;
(7) holders of the 2009 Notes will have a valid, perfected and
unavoidable (under applicable bankruptcy or insolvency laws),
subject to the passage of
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time referred to in clause (4) above, first priority security
interest in the trust funds; and
(8) NTL shall have delivered to the 2009 Note Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the Defeasance have been
complied with.
UNCLAIMED MONEY, PRESCRIPTION
If money deposited with the 2009 Note Trustee or paying agent for the
payment of principal or interest remains unclaimed for two years, the 2009 Note
Trustee and the paying agent shall pay the money back to NTL at its written
request. After that, holders of 2009 Notes entitled to the money must look to
NTL for payment unless an abandoned property law designates another person and
all liability of the 2009 Note Trustee and such paying agent shall cease. Other
than as set forth in this paragraph, the 2009 Note Indenture does not provide
for any prescription period for the payment of interest and principal on the
2009 Notes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the 2009 Notes in accordance
with procedures described in "Book-Entry; Delivery and Form." The registrar and
the 2009 Note Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and NTL may require a holder to
pay any taxes and fees required by law or permitted by the 2009 Note Indenture.
The Company is not required to transfer or exchange any 2009 Note selected for
redemption. Also, NTL is not required to transfer or exchange any 2009 Note for
a period of 15 days before a selection of 2009 Notes to be redeemed. All
transfers or exchanges of certificated notes may be effected at the offices of
the transfer agent in Luxembourg.
The registered holder of a 2009 Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the 2009 Note
Indenture or 2009 Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the then outstanding 2009
Notes (including consents obtained in connection with a tender offer or exchange
offer for such 2009 Notes), and any existing default or compliance with any
provision of the 2009 Note Indenture or 2009 Notes may be waived with the
consent of the holders of a majority in principal amount of the then outstanding
2009 Notes, including consents obtained in connection with a tender offer or
exchange offer for such 2009 Notes.
Without the consent of each holder affected, an amendment or waiver may
not, with respect to any 2009 Notes held by a non-consenting holder of 2009
Notes:
(1) reduce the amount of 2009 Notes whose holders must consent to an
amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of any 2009
Note or alter the provisions with respect to the redemption of
the 2009 Notes except for repurchases of the 2009 Notes pursuant
to the covenants described above under the captions "-- Asset
Sale" and "-- Change of Control";
(3) reduce the rate of or change the time for payment of interest on
any 2009 Note;
(4) waive a default in the payment of principal of or interest on any
2009 Notes, except a rescission of acceleration of the 2009 Notes
by the holders of at least a majority in aggregate principal
amount of the 2009 Notes and a waiver of the payment default that
resulted from such acceleration;
(5) make any 2009 Note payable in money other than that stated in the
2009 Notes;
(6) make any change in the provisions of the 2009 Note Indenture
relating to waivers of past Defaults or the rights of holders of
2009 Notes to receive payments of principal of or interest on the
2009 Notes;
(7) waive a redemption payment with respect to any 2009 Note; or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of 2009
Notes, NTL and the 2009 Note Trustee may amend or supplement the 2009 Note
Indenture or 2009 Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated 2009 Notes in addition to or in place of certificated
2009 Notes, to provide for the assumption of NTL's obligations to holders of the
2009 Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the holders of the 2009 Notes
or that does not adversely affect the legal rights under the 2009 Note Indenture
of any such holder, or to comply with requirements of the SEC in order to
maintain the qualification of the 2009 Note Indenture under the Trust Indenture
Act.
Any notice or communication to a holder of 2009 Notes shall be mailed by
first-class mail to such holder's address as shown in the register kept by the
registrar. If a notice or communication is mailed in the manner provided in the
preceding sentence within the time period prescribed, it is duly given, whether
or not the addressee receives it. If the 2009 Notes are listed on the Luxembourg
Stock Exchange, NTL will publish a notice in a daily newspaper with general
circulation in Luxembourg.
GOVERNING LAW AND JUDGMENTS
The 2009 Notes and the 2009 Note Indenture will be governed exclusively by
the laws of the State of New York. Under the Judiciary Law of the State of New
York, a judgment or decree in an action based upon an obligation denominated in
a currency other than U.S. dollars will be rendered in the foreign currency of
the underlying obligation and converted into U.S. dollars at a rate of exchange
prevailing on the date of entry of the judgment or decree.
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CONCERNING THE 2009 NOTE TRUSTEE
The 2009 Note Indenture contains limitations on the rights of the 2009 Note
Trustee, should it become a creditor of NTL, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The 2009 Note Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The 2009 Note Indenture will provide that the holders of a majority in
principal amount of then outstanding 2009 Notes will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the 2009 Note Trustee under the 2009 Note Indenture, subject
to certain exceptions. The 2009 Note Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the 2009 Note Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. The 2009 Note Indenture will provide that
subject to such provisions, the 2009 Note Trustee will be under no obligation to
exercise any of its rights or powers under the 2009 Note Indenture at the
request of any holder of 2009 Notes, unless such holder shall have offered to
the 2009 Note Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
The Chase Manhattan Bank is also the trustee for all of the Existing Notes
and the Convertible Notes.
LISTING
Application has been made to list the 2009 Notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the 2009 Notes and the
articles of association of NTL will be registered prior to the listing with the
Registrar of the District Court in Luxembourg, where such documents are
available for inspection and where copies thereof can be obtained upon request.
In addition, if and as long as the 2009 Notes are listed on the Luxembourg Stock
Exchange, an agent for making payments on, and transfers of, 2009 Notes will be
maintained in Luxembourg. NTL has initially designated Chase Manhattan Bank
Luxembourg S.A. as its agent for such purposes.
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DESCRIPTION OF THE DEFERRED COUPON NOTES
GENERAL
The new Deferred Coupon Notes will be issued pursuant to an indenture,
dated as of November 24, 1999, the closing date, between NTL and The Chase
Manhattan Bank, as Deferred Coupon Note Trustee. The following summary of
selected provisions of the Deferred Coupon Note Indenture is not complete and is
qualified in its entirety by reference to the Deferred Coupon Note Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under
"-- Definitions." In this "Description of the Deferred Coupon Notes," the term
"NTL" refers to NTL Communications Corp. and not any of its subsidiaries.
The Deferred Coupon Notes will be unsecured obligations of NTL, ranking
equal in right of payment with all senior unsecured Indebtedness of NTL and
senior in right of payment to all subordinated Indebtedness of NTL.
The operations of NTL are conducted through its subsidiaries. NTL is
dependent upon the cash flow of its subsidiaries to meet its obligations,
including its obligations under the Deferred Coupon Notes. As a result, the
Deferred Coupon Notes will be effectively subordinated to all existing and
future indebtedness and other liabilities and commitments of NTL's subsidiaries
with respect to the cash flow and assets of those subsidiaries.
Application has been made to list the Deferred Coupon Notes on the
Luxembourg Stock Exchange. The Deferred Coupon Notes are expected to be eligible
for trading in the PORTAL market.
PRINCIPAL, MATURITY AND INTEREST
From the date of issuance (the closing date), the Deferred Coupon Notes to
be issued in this exchange offer will be limited in aggregate principal amount
at maturity to E210.0 million. The Deferred Coupon Notes will be issued at a
substantial discount from their principal amount at maturity. Until November 15,
2004 no cash interest will accrue on the Deferred Coupon Notes, but the Accreted
Value of the Deferred Coupon Notes will increase, representing amortization of
original issue discount, between the date of original issuance and November 15,
2004 on a semiannual bond equivalent basis using a 360-day year comprised of
twelve 30-day months, such that the Accreted Value of the Deferred Coupon Notes
shall be equal to the full principal amount at maturity of the Deferred Coupon
Notes on November 15, 2004. Up to an additional E65,000,000 aggregate principal
amount at maturity of Deferred Coupon Notes (the "Additional Notes") may be
issued at any time, subject to the provisions of the Deferred Coupon Note
Indenture described below under the caption "Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock." If the Additional Notes are
issued more than one year after November 24, 1999, NTL will prepare an updated
listing memorandum to facilitate the listing of the Additional Notes with the
Luxembourg Stock Exchange. From November 15, 2004, cash interest on the Deferred
Coupon Notes will accrue at the rate of 11 1/2% per annum and will be payable
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in cash, semiannually in arrears, on each May 15 and November 15, commencing May
15, 2005, to holders of record on the immediately preceding May 1 and November
1.
The Accreted Value of each Deferred Coupon Note on each semi-annual accrual
date will be as set forth below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
- ------------------------ --------------
<S> <C>
May 15, 2000.......................................... E604.61
November 15, 2000..................................... E639.37
May 15, 2001.......................................... E676.14
November 15, 2001..................................... E715.01
May 15, 2002.......................................... E756.13
November 15, 2002..................................... E799.61
May 15, 2003.......................................... E845.58
November 15, 2003..................................... E894.20
May 15, 2004.......................................... E945.62
November 15, 2004..................................... E1,000.00
</TABLE>
Interest on overdue principal and to the extent permitted by law on overdue
installments of interest will accrue at a rate equal to the rate borne by the
Deferred Coupon Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. A reference to a payment of interest in
respect of the Deferred Coupon Notes includes a payment of special interest, if
any, and a reference to a payment of principal includes a reference to a payment
of premium, if any.
The Deferred Coupon Notes will be payable both as to principal and interest
on presentation of such Deferred Coupon Notes if in certificated form at the
offices or agencies of NTL maintained for such purpose within the City and State
of New York or, at the option of NTL, payment of interest may be made by check
mailed to the holders of the Deferred Coupon Notes at their respective addresses
set forth in the register of holders of Deferred Coupon Notes or, if a holder so
requests, by wire transfer of immediately available funds to an account
previously specified in writing by such holder to NTL and the Deferred Coupon
Note Trustee. Until otherwise designated by NTL, NTL's office or agency in New
York and London, respectively, will be the offices of the Deferred Coupon Note
Trustee maintained for such purpose. In addition, as described under the caption
"Listing," so long as the Deferred Coupon Notes are listed on the Luxembourg
Stock Exchange, an agent for making payments on, and transfers of, Deferred
Coupon Notes will be maintained in Luxembourg. The Deferred Coupon Notes mature
on November 15, 2009, and will be issued in registered form, without coupons,
and in denominations of E1,000 and integral multiples of E1,000.
OPTIONAL REDEMPTION
Except as referred to herein under "-- Covenants -- Additional amounts;
Optional Tax Redemption", the Deferred Coupon Notes are not redeemable at NTL's
option prior to November 15, 2004. Thereafter, the Deferred Coupon Notes will be
subject to redemption at the option of NTL, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices set forth below,
expressed as percentages of principal amount at maturity, plus accrued and
unpaid interest thereon to the applicable redemption
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date, if redeemed during the twelve-month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 105.750%
2005........................................................ 103.833%
2006........................................................ 101.917%
2007 and thereafter......................................... 100.000%
</TABLE>
In the case of a redemption of any class of Deferred Coupon Notes referred
to herein under "-- Covenants -- Additional Amounts; Optional Tax Redemption,"
redemption of such Deferred Coupon Notes shall be made at the redemption prices
specified in the Deferred Coupon Note Indenture plus accrued and unpaid
interest, if any, to the applicable redemption date.
MANDATORY REDEMPTION AND REPURCHASE
NTL is not required to make mandatory redemption or sinking fund payments
with respect to the Deferred Coupon Notes. NTL is required to make a Change of
Control Offer (as defined below) and an Asset Sale Offer (as defined below) with
respect to a repurchase of the Deferred Coupon Notes under the circumstances
described under the captions "Change of Control" and "Asset Sales",
respectively.
CHANGE OF CONTROL
If a Change of Control Triggering Event occurs, each holder of Deferred
Coupon Notes shall have the right to require NTL to repurchase all or any part
of such holder's Deferred Coupon Notes equal to E1,000 or an integral multiple
of E1,000, pursuant to the Change of Control Offer at a purchase price equal to
101% of the Accreted Value of those Deferred Coupon Notes as of the date of
purchase. The payment shall be referred to as the Change of Control Payment.
Within 40 days following any Change of Control Triggering Event, NTL shall mail
a notice to each holder, and, if and so long as the Deferred Coupon Notes are
listed on the Luxembourg Stock Exchange publish a notice in one leading
newspaper with circulation in Luxembourg, stating:
(1) that the Change of Control Offer is being made pursuant to the
covenant entitled "Change of Control" and that all Deferred Coupon Notes
tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such notice is
mailed. This date is referred to as the "Change of Control Payment Date";
(3) that the Accreted Value of any Deferred Coupon Notes not tendered
will continue to increase as provided in those Deferred Coupon Notes;
(4) that, unless NTL defaults in the payment of the Change of Control
Payment, the Accreted Value of all Deferred Coupon Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrete
after the Change of Control Payment Date;
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(5) that holders electing to have any Deferred Coupon Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Deferred Coupon Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Deferred Coupon Notes completed, to the
paying agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date;
(6) that holders will be entitled to withdraw their election if the
paying agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of Deferred Coupon Notes delivered for
purchase, and a statement that such holder is withdrawing his election to
have such Deferred Coupon Notes purchased; and
(7) that holders whose Deferred Coupon Notes are being purchased only
in part will be issued new Deferred Coupon Notes equal in Accreted Value to
the unpurchased portion of the Deferred Coupon Notes surrendered, which
unpurchased portion must be equal to E1,000 in principal amount at maturity
or an integral multiple of E1,000.
NTL will comply with the requirements of Rules 13e-4 and 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the Deferred Coupon Notes in connection with a Change of Control
Triggering Event.
On the Change of Control Payment Date, NTL will, to the extent lawful:
(1) accept for payment Deferred Coupon Notes or portions thereof
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all Deferred Coupon Notes or portions thereof
so tendered; and
(3) deliver or cause to be delivered to the Deferred Coupon Notes
Trustee the Deferred Coupon Notes so accepted together with an Officers'
Certificate stating the Deferred Coupon Notes or portions of Deferred
Coupon Notes tendered to NTL.
The paying agent shall promptly mail to each holder of Deferred Coupon
Notes so accepted, or, if such a holder requests, wire transfer immediately
available funds to an account previously specified in writing by such holder to
NTL and the paying agent, payment in an amount equal to the purchase price for
such Deferred Coupon Notes and, if such Deferred Coupon Notes are in
certificated form, payment may be made at the office of the paying agent in
Luxembourg. The Deferred Coupon Note Trustee shall promptly authenticate and
mail to each holder a new Deferred Coupon Note equal in Accreted Value to any
unpurchased portion of the Deferred Coupon Notes surrendered, if any; provided
that each such new Deferred Coupon Note shall be in a principal amount at
maturity of E1,000 or an integral multiple of E1,000. NTL will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
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Except as described above with respect to a Change of Control Triggering
Event, the Deferred Coupon Note Indenture does not contain any other provision
that permits the holders of the Deferred Coupon Notes to require that NTL
repurchase or redeem the Deferred Coupon Notes in the event of a takeover,
recapitalization or similar restructuring. The Deferred Coupon Note Indenture
contains covenants which may afford holders of the Deferred Coupon Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction, including the Change of Control
provision described above and the provisions described under "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" and "-- Merger, Consolidation or
Sale of Assets" below. Each of those covenants is, however, subject to
exceptions which may permit NTL to be involved in a highly leveraged transaction
that may adversely affect the holders of the Deferred Coupon Notes.
The Change of Control Offer requirement of the Deferred Coupon Notes may,
in certain circumstances, make more difficult or discourage a takeover of NTL,
and, thus, the removal of incumbent management. Management has not entered into
any agreement or plan involving a Change of Control, although it is possible
that NTL would decide to do so in the future. Subject to the limitations
discussed below, NTL could, in the future, enter into various transactions
including acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control Triggering Event under the Deferred Coupon Note
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect NTL's capital structure or credit ratings.
The indentures for our other outstanding senior notes (including the 2006
Notes and the 2009 Notes) and convertible notes also contain change of control
provisions.
NTL's ability to pay cash to the holders of Deferred Coupon Notes pursuant
to a Change of Control Offer may be limited by NTL's then existing financial
resources. See "Risk Factors -- Our substantial leverage could adversely affect
our financial health and prevent us from fulfilling our obligation under the
notes" and "-- We are a holding company that is dependant upon cash flow from
our subsidiaries -- our ability to access that cash flow may be limited in some
circumstances". Any future credit agreements or other agreements relating to
indebtedness of NTL may, contain prohibitions or restrictions on NTL's ability
to effect a Change of Control Payment. In the event a Change of Control
Triggering Event occurs at a time when such prohibitions or restrictions are in
effect, NTL could seek the consent of its lenders to the purchase of Deferred
Coupon Notes and other indebtedness containing change of control provisions or
could attempt to refinance the borrowings that contain such prohibition. If NTL
does not obtain such a consent or repay such borrowings, NTL will be effectively
prohibited from purchasing the Deferred Coupon Notes. In such case, NTL's
failure to purchase tendered Deferred Coupon Notes would constitute an Event of
Default under the Deferred Coupon Note Indenture. Moreover, the events that
constitute a Change of Control or require an Asset Sale Offer under the Deferred
Coupon Note Indenture may also constitute events of default under future debt
instruments or credit agreements of NTL or NTL's Subsidiaries. Such events of
default may permit the lenders under such debt instruments or credit agreements
to accelerate the debt and, if such debt is not paid or repurchased, to enforce
their security interests in what
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may be all or substantially all of the assets of NTL's Subsidiaries. Any such
enforcement may limit NTL's ability to raise cash to repay or repurchase the
Deferred Coupon Notes.
NTL will not be required to make a Change of Control Offer in the event NTL
enters into a transaction with management or their affiliates who are Permitted
Holders. The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of NTL's assets. Although there is a developing body of case law
interpreting the phrase "substantially all", there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Deferred Coupon Notes to require NTL to repurchase those Deferred
Coupon Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of NTL and its Subsidiaries to
another Person may be uncertain.
ASSET SALE
The Deferred Coupon Note Indenture provides that NTL will not and will not
permit any of its Restricted Subsidiaries to cause, make or suffer to exist any
Asset Sale, unless:
(1) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale;
(2) NTL or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to
the fair market value, evidenced for purposes of this covenant by
a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Deferred Coupon Note Trustee, of the
assets sold or otherwise disposed of; and
(3) at least 80% of the consideration therefor received by NTL or the
Restricted Subsidiary is in the form of:
(a) Cash Equivalents;
(b) Replacement Assets;
(c) publicly traded Equity Interests of a Person who is,
directly or indirectly, engaged primarily in one or more
Cable Businesses; provided, however, that NTL or the
Restricted Subsidiary shall Monetize the Equity Interests
by sale to one or more Persons, other than to NTL or a
Subsidiary thereof, at a price not less than the fair
market value thereof within 180 days of the consummation of
the Asset Sale; or
(d) any combination of the foregoing clauses (a) through (c);
provided, however, that the amount of:
(x) any liabilities, as shown on NTL's or the Restricted
Subsidiary's most recent balance sheet or in the notes
thereto, of NTL or any Restricted Subsidiary, other than
liabilities that are by their terms subordinated to the
Deferred Coupon Notes, that are assumed by the transferee
of any such assets; and
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(y) any notes or other obligations received by NTL or any
Restricted Subsidiary from such transferee that are within
five Business Days converted by NTL or the Restricted
Subsidiary into cash, shall be deemed to be Cash
Equivalents, to the extent of the Cash Equivalents received
in such conversion, for purposes of this clause (3).
Within 360 days after any Asset Sale, NTL or the Restricted Subsidiary, as
the case may be, will cause the Net Proceeds from the Asset Sale:
(1) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary; or
(2) to be invested or reinvested in Replacement Assets.
Pending final application of any Net Proceeds, NTL may temporarily reduce
revolving credit borrowings or otherwise invest those Net Proceeds in any manner
that is not prohibited by the Deferred Coupon Note Indenture.
Any Net Proceeds from any Asset Sale that are not used or reinvested as
provided in the preceding sentence constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $15.0 million, NTL will make an
Asset Sale Offer to all holders of Deferred Coupon Notes and Other Qualified
Notes to purchase the maximum principal amount of Deferred Coupon Notes and
Other Qualified Notes, determined on a pro rata basis according to the Accreted
Value or principal amount, as the case may be, of the Deferred Coupon Notes and
the Other Qualified Notes that may be purchased out of the Excess Proceeds:
(1) with respect to the Other Qualified Notes, based on the terms set
forth in the indenture related to each issue of the Other
Qualified Notes; and
(2) with respect to the Deferred Coupon Notes, at an offer price in
cash in an amount equal to 100% of the Accreted Value of those
Deferred Coupon Notes as of the date of repurchase in accordance
with the procedures set forth in the Deferred Coupon Note
Indenture.
To the extent that the Accreted Value of Deferred Coupon Notes and Other
Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, NTL may use such deficiency for general corporate purposes. If the
Accreted Value of Deferred Coupon Notes and Other Qualified Notes surrendered by
holders thereof exceeds the amount of Excess Proceeds then the remaining Excess
Proceeds will be allocated pro rata according to Accreted Value to the Deferred
Coupon Notes and each issue of the Other Qualified Notes, and the Deferred
Coupon Note Trustee will select the Deferred Coupon Notes to be purchased from
the amount allocated to the Deferred Coupon Notes on the basis set forth under
"Selection and Notice" below. Upon completion of such offers to purchase each of
the Deferred Coupon Notes and the Other Qualified Notes, the amount of Excess
Proceeds will be reset at zero.
Notwithstanding the foregoing, NTL and its Subsidiaries may:
(1) sell, lease, transfer, convey or otherwise dispose of assets or
property acquired after October 14, 1993, by NTL or any
Subsidiary in a sale-and-
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leaseback transaction so long as the proceeds of such sale are
applied within five Business Days to permanently reduce
Indebtedness of a Restricted Subsidiary or if there is no such
Indebtedness or such proceeds exceed the amount of such
Indebtedness then such proceeds or excess proceeds are reinvested
in Replacement Assets within 360 days after such sale, lease,
transfer, conveyance or disposition;
(2) (x) swap or exchange assets or property with a Cable Controlled
Subsidiary; or
(y) issue, sell, lease, transfer, convey or otherwise dispose
of equity securities of any of NTL's Subsidiaries to a
Cable Controlled Subsidiary, in each of cases (x) and (y)
so long as:
(A) the ratio of Indebtedness to Annualized Pro Forma
EBITDA of NTL after such transaction is equal to or
less than the ratio of Indebtedness to Annualized Pro
Forma EBITDA of NTL immediately preceding such
transaction; provided, however, that if the ratio of
Indebtedness to Annualized Pro Forma EBITDA of NTL
immediately preceding such transaction is 6:1 or less,
then the ratio of Indebtedness to Annualized Pro Forma
EBITDA of NTL may be 0.5 greater than such ratio
immediately preceding such transaction; and
(B) either:
(I) the assets so contributed consist solely of a
license to operate a Cable Business and the Net
Households covered by all of the licenses to
operate cable and telephone systems held by NTL
and its Restricted Subsidiaries immediately after
and giving effect to such transaction equals or
exceeds the number of Net Households covered by
all of the licenses to operate cable and
telephone systems held by NTL and its Restricted
Subsidiaries immediately prior to such
transaction; or
(II) the assets so contributed consist solely of Cable
Assets and the value of the Capital Stock
received, immediately after and giving effect to
such transaction, as determined by an investment
banking firm of recognized standing with
knowledge of the Cable Business, equals or
exceeds the value of the Cable Assets exchanged
for such Capital Stock; or
(3) issue, sell, lease, transfer, convey or otherwise dispose of
Equity Interests of NTL, or any Capital Stock Sales Proceeds
therefrom, to any Person including Non-Restricted Subsidiaries.
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SELECTION AND NOTICE
If less than all of the Deferred Coupon Notes are to be redeemed at any
time, selection of Deferred Coupon Notes for redemption will be made by the
Deferred Coupon Note Trustee in compliance with the requirements of any
securities exchange on which the Deferred Coupon Notes are listed. In the
absence of any requirements of any securities exchange or if the Deferred Coupon
Notes are not listed, selection of the Deferred Coupon Notes to be redeemed will
be made on a pro rata basis, provided that no Deferred Coupon Notes of E1,000 or
less at maturity shall be redeemed in part. Notice of redemption shall be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each holder of Deferred Coupon Notes to be redeemed at its registered
address. If any Deferred Coupon Note is to be redeemed in part only, the notice
of redemption that relates to such Deferred Coupon Note shall state the portion
of the principal amount at maturity thereof to be redeemed. A new Deferred
Coupon Note in principal amount at maturity equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Deferred Coupon Note. On and after the redemption date, interest
ceases to accrue or, if applicable, the Accreted Value of any Deferred Coupon
Notes tendered will cease to increase as provided in the Deferred Coupon Notes,
on Deferred Coupon Notes or portions of them called for redemption.
If the Deferred Coupon Notes are listed on the Luxembourg Stock Exchange,
NTL will publish a redemption notice in a daily newspaper with general
circulation in Luxembourg.
COVENANTS
RESTRICTED PAYMENTS
The Deferred Coupon Note Indenture provides that NTL will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution on account
of NTL's or any of its Restricted Subsidiaries' Equity Interests,
other than:
(x) dividends or distributions payable in Equity Interests, other
than Disqualified Stock, of NTL or such Restricted
Subsidiary; or
(y) dividends or distributions payable to NTL or any Wholly Owned
Subsidiary of NTL; or
(z) pro rata dividends or pro rata distributions payable by a
Restricted Subsidiary;
(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of NTL, other than any such Equity Interests
owned by NTL or any Wholly Owned Subsidiary of NTL;
(3) voluntarily purchase, redeem or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Deferred
Coupon Notes; or
(4) make any Restricted Investment.
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All such payments and other actions set forth in clauses (1) through (4)
above are collectively referred to as Restricted Payments.
NTL or the Restricted Subsidiary may make a Restricted Payment if, at the
time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by NTL and its Restricted
Subsidiaries after the Issuance Date, including Restricted
Payments permitted by clauses (2) through (10) of the next
succeeding paragraph, is less than the sum of:
(x) the difference between Cumulative EBITDA and 1.5 times
Cumulative Interest Expense; plus
(y) Capital Stock Sale Proceeds; plus
(z) cash received by NTL or a Restricted Subsidiary from a
Non-Restricted Subsidiary, other than cash which is or
is required to be repaid or returned to such
Non-Restricted Subsidiary; provided, however, that to
the extent that any Restricted Investment that was made
after the date of the Deferred Coupon Notes Indenture is
sold for cash or otherwise liquidated or repaid for
cash, the amount credited pursuant to this clause (z)
shall be the lesser of:
(A) the cash received with respect to such sale,
liquidation or repayment of such Restricted
Investment, less the cost of such sale, liquidation
or repayment, if any; and
(B) the initial amount of such Restricted Investment,
in each case as determined in good faith by NTL's
Board of Directors.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Deferred Coupon
Note Indenture;
(2) (x) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of NTL or any Restricted Subsidiary;
or
(y) an Investment in any Person;
in each case, in exchange for, or out of the proceeds of, the
substantially concurrent sale, other than to a Restricted
Subsidiary of NTL, of other Equity Interests, other than any
Disqualified Stock, of NTL provided that NTL delivers to the
Deferred Coupon Note Trustee:
(A) with respect to any transaction involving in excess of $1.0
million, a resolution of the Board of Directors set forth in
an Officers'
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Certificate certifying that such transaction is approved by
a majority of the directors on the Board of Directors; and
(B) with respect to any transaction involving in excess of $25.0
million, an opinion as to the fairness to NTL or the
Restricted Subsidiary from a financial point of view issued
by an investment banking firm of national standing with high
yield experience, together with an Officers' Certificate to
the effect that such opinion complies with this clause (2);
(3) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which:
(A) has no Indebtedness on a consolidated basis other than
Indebtedness incurred to finance the purchase of equipment
used in a Cable Business;
(B) has no restrictions, other than restrictions imposed or
permitted by the Deferred Coupon Note Indenture or the
indentures governing the Other Qualified Notes or any other
instrument governing unsecured indebtedness of NTL which is
equal in right of payment with the Deferred Coupon Notes,
on its ability to pay dividends or make any other
distributions to NTL or any of its Restricted Subsidiaries;
(C) is or will be a Cable Business; and
(D) uses the proceeds of such Investment for constructing a
Cable Business or the working capital needs of a Cable
Business;
(4) the redemption, purchase, defeasance, acquisition or retirement
of Indebtedness that is subordinated to the Deferred Coupon
Notes, including premium, if any, and accrued and unpaid
interest, made by exchange for, or out of the proceeds of the
substantially concurrent sale, other than to a Restricted
Subsidiary of NTL, of:
(A) Equity Interests of NTL; or
(B) Refinancing Indebtedness permitted to be incurred under
the "Incurrence of indebtedness and issuance of preferred stock"
covenant;
(5) Investments by NTL or any Restricted Subsidiary in a
Non-Controlled Subsidiary which is or will be a Cable Business
in an amount not to exceed $100.0 million in the aggregate plus
the sum of:
(A) cash received by NTL or a Restricted Subsidiary from a Non-
Restricted Subsidiary, other than cash which is or is
required to be repaid or returned to such Non-Restricted
Subsidiary; and
(B) Capital Stock Sale Proceeds, excluding the aggregate net
sale proceeds to be received upon conversion of the
Convertible Subordinated Notes;
(6) Investments by NTL or any Restricted Subsidiary in Permitted
Non-Controlled Assets;
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(7) Investments by NTL or any Restricted Subsidiary in SDN Limited,
a joint venture organized to operate a digital terrestrial
television multiplex, in an amount not exceeding L11.4 million;
(8) the extension by NTL or any Restricted Subsidiary of trade
credit to a Non-Restricted Subsidiary extended on usual and
customary terms in the ordinary course of business, provided
that the aggregate amount of such trade credit shall not exceed
$25.0 million at any one time;
(9) the payment of cash dividends on the Preferred Stock accruing on
or after February 15, 2004 or any mandatory redemption or
repurchase of the Preferred Stock, in each case, in accordance
with the Certificate of Designations therefor; and
(10) the exchange of all of the outstanding shares of Preferred Stock
for Subordinated Debentures in accordance with the Certificate
of Designation for the Preferred Stock.
Any Investment in a Subsidiary, other than the issuance, transfer or other
conveyance of Equity Interests of NTL or any Capital Stock Sales Proceeds
therefrom, that is designated by the Board of Directors as a Non-Restricted
Subsidiary shall become a Restricted Payment made on the date of such
designation in the amount of the greater of:
(x) the book value of such Subsidiary on the date such Subsidiary
becomes a Non-Restricted Subsidiary; and
(y) the fair market value of such Subsidiary on such date as
determined:
(A) in good faith by the Board of Directors of such Subsidiary
if such fair market value is determined to be less than
$25.0 million; and
(B) by an investment banking firm of national standing with
high yield underwriting expertise if such fair market value
is determined to be in excess of $25.0 million.
Not later than the fifth Business Day after making any Restricted Payment,
other than those referred to in sub-clause (8) of the second paragraph preceding
this paragraph, NTL shall deliver to the Deferred Coupon Note Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, which calculations may be based upon NTL's
latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Deferred Coupon Note Indenture provides that NTL will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guaranty or otherwise become directly or indirectly liable
with respect to any Indebtedness, including Acquired Debt, and that NTL will not
issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock that is Disqualified Stock;
provided, however, that NTL may incur Indebtedness or issue shares of
Disqualified Stock and any of its Restricted Subsidiaries may issue shares of
preferred
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stock that is Disqualified Stock if after giving effect to such issuance or
incurrence on a pro forma basis, the sum of:
(x) Indebtedness of NTL and its Restricted Subsidiaries, on a
consolidated basis;
(y) the liquidation value of outstanding preferred stock of Restricted
Subsidiaries; and
(z) the aggregate amount payable by NTL and its Restricted
Subsidiaries, on a consolidated basis, upon redemption of
Disqualified Stock to the extent such amount is not included in the
preceding clause (y) shall be less than the product of Annualized
Pro Forma EBITDA for the latest fiscal quarter for which internal
financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued multiplied by 7.0,
determined on a pro forma basis, including a pro forma application
of the net proceeds therefrom, as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had
been issued, as the case may be, at the beginning of such quarter.
The foregoing limitations will not apply to:
(a) the incurrence by NTL or any Restricted Subsidiary of
Indebtedness pursuant to the Credit Facility;
(b) the issuance by any Restricted Subsidiary of preferred stock,
other than Disqualified Stock, to NTL, any Restricted Subsidiary
of NTL or the holders of Equity Interests in any Restricted
Subsidiary on a pro rata basis to such holders;
(c) the incurrence of Indebtedness or the issuance of preferred
stock by NTL or any of its Restricted Subsidiaries the proceeds
of which are, or the credit support provided by any such
Indebtedness is, in each case, used to finance the construction,
capital expenditure and working capital needs of a Cable
Business, including, without limitation, payments made pursuant
to any License, the acquisition of Cable Assets or the Capital
Stock of a Qualified Subsidiary;
(d) the incurrence by NTL or any of its Restricted Subsidiaries of
additional Indebtedness in an outstanding aggregate principal
amount not to exceed $100.0 million at any time;
(e) the incurrence by NTL or any Restricted Subsidiary of any
Permitted Acquired Debt;
(f) the incurrence by NTL or any Subsidiary of Indebtedness issued
in exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, or refund the 2006 Notes, the 2009
Notes, or the Deferred Coupon Notes, Existing Indebtedness or
Indebtedness referred to in clauses
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(a), (b), (c), (d) or (e) above or the Refinancing Indebtedness
incurred pursuant to the preceding paragraph; provided, however,
that:
(1) the principal amount of, and any premium payable in
respect of, such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness so extended,
refinanced, renewed, replaced or refunded plus the amount
of reasonable expenses incurred in connection therewith;
(2) the Refinancing Indebtedness shall have:
(A) a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed,
replaced or refunded; and
(B) a stated maturity no earlier than the stated maturity
of, the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and
(3) the Refinancing Indebtedness shall be subordinated in
right of payment to the notes as and to the extent of the
Indebtedness being extended, refinanced, renewed, replaced
or refunded;
(g) the issuance of the Preferred Stock in lieu of payment of cash
interest on the Subordinated Debentures or the incurrence by NTL
of Indebtedness represented by the Subordinated Debentures upon
the exchange of the Preferred Stock in accordance with the
Certificate of Designations therefor;
(h) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts are related to payment obligations under
Existing Indebtedness or Indebtedness incurred under this
paragraph or the preceding paragraph that are being hedged
thereby, and not for speculation and that the aggregate notional
amount under each such Exchange Rate Contract does not exceed
the aggregate payment obligations under such Indebtedness;
(i) Indebtedness under Interest Rate Agreements, provided that the
obligations under such agreements are related to payment
obligations on Existing Indebtedness or Indebtedness otherwise
incurred pursuant to this paragraph or the preceding paragraph,
and not for speculation;
(j) the incurrence of Indebtedness between NTL and any Restricted
Subsidiary, between or among Restricted Subsidiaries and between
any Restricted Subsidiary and other holders of Equity Interests
of such Restricted Subsidiary, or other Persons providing
funding on their behalf, on a pro rata basis and on
substantially identical principal financial terms, provided,
however, that if any such Restricted Subsidiary that is the
payee of any such Indebtedness ceases to be a Restricted
Subsidiary or transfers such Indebtedness, other than to NTL or
a Restricted Subsidiary of NTL, such events shall be deemed, in
each case, to constitute the incurrence of such
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Indebtedness by NTL or by a Restricted Subsidiary, as the case
may be, at the time of such event; and
(k) Indebtedness of NTL and/or any Restricted Subsidiary in respect
of performance bonds of NTL or any Subsidiary or surety bonds
provided by NTL or any Restricted Subsidiary received in the
ordinary course of business in connection with the construction
or operation of a Cable Business.
Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary
shall be deemed for purposes of the foregoing covenant to be an incurrence of
Indebtedness by NTL and its Restricted Subsidiaries of the Indebtedness of such
Non-Restricted Subsidiary as of the time of such redesignation to the extent
such Indebtedness does not already constitute Indebtedness of NTL or one of its
Restricted Subsidiaries.
LIENS
The Deferred Coupon Note Indenture provides that neither NTL nor any of its
Restricted Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except:
(1) Permitted Liens;
(2) Liens securing Indebtedness and related obligations incurred
under clauses (a), (b), (c), (d), (e), (h), (i) and (k) of the
second paragraph of the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant;
(3) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant; and
(4) Liens securing Refinancing Indebtedness permitted to be incurred
under the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; provided that the Refinancing Indebtedness so
issued and secured by such Lien shall not be secured by any
property or assets of NTL or any of its Restricted Subsidiaries
other than the property or assets subject to the Liens securing
such Indebtedness being refinanced.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Deferred Coupon Note Indenture provides that NTL will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to NTL or any
of its Subsidiaries:
(A) on its Capital Stock; or
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(B) with respect to any other interest or participation in,
or measured by, its profits: or
(b) pay any indebtedness owed to NTL or any of its Subsidiaries;
or
(2) make loans or advances to NTL or any of its Subsidiaries; or
(3) transfer any of its properties or assets to NTL or any of its
Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(a) Existing Indebtedness as in effect on the Issuance Date;
(b) the indentures relating to the 2006 Notes, the 2009 Notes
and the Deferred Coupon Notes;
(c) any agreement covering or relating to Indebtedness permitted
to be incurred under clause (a), (b), (c), (d), (e), (h) or
(i), but only, in the case of clause (h) or (i), to the
extent contemplated by the then-existing Credit Facility, of
the second paragraph of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, provided that the
provisions of such agreement permit any action referred to
in clause (1) above in aggregate amounts sufficient to
enable the payment of interest and principal and mandatory
repurchases pursuant to the terms of the indentures and the
notes but provided further that:
(x) any such agreement may nevertheless encumber,
prohibit or restrict any action referred to in clause
(1) above if an event of default under such agreement
has occurred and is continuing or would occur as a
result of any such action; and
(y) any such agreement may nevertheless contain:
(I) restrictions limiting the payment of dividends
or the making of any other distributions to
all or a portion of excess cash-flow or any
similar formulation thereof; and
(II) subordination provisions governing
Indebtedness owed to NTL or any Restricted
Subsidiary;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a
Person acquired by NTL or any of its Subsidiaries as in effect at
the time of such acquisition, except to the extent such
Indebtedness was incurred in connection with such acquisition,
which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired; provided
that the EBITDA of such Person is not taken into account in
determining whether such acquisition was permitted by the terms
of the Deferred Coupon Note Indenture;
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(6) customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) provisions of joint venture or stockholder agreements, so long as
such provisions are determined by a resolution of the Board of
Directors to be, at the time of such determination, customary for
such agreements;
(8) with respect to clause (c) above, purchase money obligations for
property acquired in the ordinary course of business or the
provisions of any agreement with respect to any Asset Sale, or
transaction which, but for its size, would be an Asset Sale,
solely with respect to the assets being sold; or
(9) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such
Refinancing Indebtedness are determined by a resolution of the
Board of Directors to be no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Deferred Coupon Note Indenture provides that NTL may not consolidate or
merge with or into, whether or not NTL is the surviving corporation, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
(1) NTL is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger, if other
than NTL, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or
the Cayman Islands or of the United States, any state thereof or
the District of Columbia;
(2) the entity or Person formed by or surviving any such
consolidation or merger, if other than NTL, or the entity or
Person to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all
the Obligations, including the due and punctual payment of
Additional Amounts as defined in the Deferred Coupon Note
Indenture if the surviving corporation is a corporation organized
or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands, of NTL, pursuant to a supplemental indenture in a form
reasonably satisfactory to the Deferred Coupon Note Trustee,
under the Deferred Coupon Notes and the Deferred Coupon Note
Indenture;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) NTL or any entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or
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other disposition will have been made will have a ratio of
Indebtedness to Annualized Pro Forma EBITDA equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA of NTL
immediately preceding the transaction provided, however, that if
the ratio of Indebtedness to Annualized Pro Forma EBITDA of NTL
immediately preceding such transaction is 6:1 or less, then the
ratio of Indebtedness to Annualized Pro Forma EBITDA of NTL may
be 0.5 greater than such ratio immediately preceding such
transaction; and
(5) such transaction would not result in the loss of any material
authorization or Material License of NTL or its Subsidiaries.
ADDITIONAL AMOUNTS; OPTIONAL TAX REDEMPTION
The Deferred Coupon Note Indenture provides that the "Payment of Additional
Amounts" provision in the Deferred Coupon Note Indenture, relating to United
Kingdom, Netherlands, Netherlands Antilles, Bermuda and Cayman Islands
withholding and other United Kingdom, Netherlands, Netherlands Antilles, Bermuda
and Cayman Islands taxes, and the "Optional Tax Redemption" provision in the
Deferred Coupon Note Indenture, relating to NTL's option to redeem the Deferred
Coupon Notes under specified circumstances if Additional Amounts are payable,
apply to the Deferred Coupon Notes in specified circumstances. The provisions of
the Deferred Coupon Note Indenture relating to the payment of Additional Amounts
will only apply in the event that NTL becomes, or a successor to NTL is, a
corporation organized or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. In such
circumstances, all payments made by NTL on the Deferred Coupon Notes will be
made without deduction or withholding, for or on account of, any and all present
or future taxes, duties, assessments, or governmental charges of whatever nature
unless the deduction or withholding of such taxes, duties, assessments or
governmental charges is then required by law. If any deduction or withholding
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands, or any political subdivision or taxing
authority thereof or therein, shall at any time be required in respect of any
amounts to be paid by NTL under the Deferred Coupon Notes, NTL will pay or cause
to be paid such Additional Amounts as may be necessary in order that the net
amounts received by a holder of the Deferred Coupon Notes after such deduction
or withholding shall be not less than the amounts specified in the Deferred
Coupon Notes to which the holder of such Deferred Coupon Notes is entitled;
provided, however, that NTL shall not be required to make any payment of
Additional Amounts for or on account of:
(1) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have
been imposed but for:
(a) the existence of any present or former connection between
such holder, or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over,
such holder, if such
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holder is an estate, nominee, trust, partnership or
corporation, other than the holding of the Deferred Coupon
Notes or the receipt of amounts payable in respect of the
Deferred Coupon Notes and the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands or any political subdivision or taxing
authority thereof or therein, including, without
limitation, such holder, or such fiduciary, settlor,
beneficiary, member, shareholder or possessor, being or
having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein
or having had a permanent establishment therein; or
(b) the presentation of the Deferred Coupon Notes, where
presentation is required, for payment on a date more than 30
days after the date on which such payment became due and
payable or the date on which payment thereof is duly
provided for, whichever occurs later, except to the extent
that the holder would have been entitled to Additional
Amounts had the Deferred Coupon Notes been presented on the
last day of such period of 30 days;
(2) any governmental charge that is imposed or withheld by reason of
the failure to comply by the holder of the Deferred Coupon Notes
or, if different, the beneficial owner of the interest payable on
the Deferred Coupon Notes, with a timely request of NTL addressed
to such holder or beneficial owner to provide information,
documents or other evidence concerning the nationality, identity
or connection with the taxing jurisdiction of such holder or
beneficial owner which is required or imposed by a statute,
regulation or administrative practice of the taxing jurisdiction
as a precondition to exemption from all or part of such tax
assessment or governmental charge;
(3) any estate, inheritance, gift, sales, transfer, personal property
or similar tax assessment or other governmental charge;
(4) any tax assessment or other governmental charge which is
collectible otherwise than by withholding from payments of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a Deferred Coupon Note or withholding
from the proceeds of a sale or exchange of a Deferred Coupon
Note;
(5) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal
amount, redemption amount, Change of Control Payment or interest
with respect to a Deferred Coupon Note, if such payment can be
made, and is in fact made, without such withholding by any other
paying agent located inside the United States;
(6) any tax, assessment or other governmental charge imposed on a
holder that is not the beneficial owner of a Deferred Coupon Note
to the extent that the beneficial owner would not have been
entitled to the payment of any such
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Additional Amounts had the beneficial owner directly held the
Deferred Coupon Note; or
(7) any combination of items (1), (2), (3), (4), (5) and (6) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on the Deferred Coupon Notes to any holder who is
a fiduciary or partnership or other than the sole beneficial owner of such
payment to the extent that a beneficiary or settlor would not have been entitled
to any Additional Amounts had such beneficiary or settlor been the holder of the
Deferred Coupon Notes.
The Deferred Coupon Notes may be redeemed at the option of NTL, in whole
but not in part, upon not less than 30 nor more than 60 days notice, at any time
upon the circumstances set forth below. The redemption price will be equal to
the principal amount of the Deferred Coupon Notes plus accrued and unpaid
interest to the date fixed for redemption or in the case of redemption of
Deferred Coupon Notes prior to November 15, 2004, at a redemption price equal to
100% of the Accreted Value of the Deferred Coupon Notes as of the date fixed for
redemption if after the Issuance Date there has occurred any change in or
amendment to the laws, or any regulations or official rulings promulgated
thereunder, of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands, or any political subdivision or taxing authority
thereof or therein, or any change in or amendment to the official application or
interpretation of such laws, regulation or rulings which becomes effective after
the Issuance Date, as a result of which NTL is or would be so required on the
next succeeding Interest Payment Date to pay Additional Amounts with respect to
the Deferred Coupon Notes with respect to Withholding Taxes imposed by the
United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands, or any political subdivision or taxing authority thereof or therein and
such Withholding Tax is imposed at a rate that exceeds the rate, if any, at
which Withholding Tax was imposed on the Issuance Date provided that:
(1) this paragraph shall not apply to the extent that, at the
Relevant Date it was known or would have been known had
professional advice of a nationally recognized accounting firm in
the United Kingdom, Netherlands, Netherlands Antilles, Bermuda or
the Cayman Islands, as the case may be, been sought, that a
Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, was to occur
after the Issuance Date;
(2) no such notice of redemption may be given earlier than 90 days
prior to the earliest date on which NTL would be obliged to pay
such Additional Amounts were a payment in respect of the Deferred
Coupon Notes then due;
(3) at the time such notice of redemption is given, such obligation
to pay such Additional Amount remains in effect; and
(4) the payment of such Additional Amounts cannot be avoided by the
use of any reasonable measures available to NTL.
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The Deferred Coupon Notes may also be redeemed, in whole but not in part,
at any time upon the circumstances set forth below. The redemption price will be
equal to the principal amount at maturity of the Deferred Coupon Notes plus
accrued and unpaid interest to the date fixed for redemption or in the case of
redemption of Deferred Coupon Notes prior to November 15, 2004, at a redemption
price equal to 100% of the Accreted Value of the Deferred Coupon Notes as of the
date fixed for redemption if the Person formed after the Issuance Date by a
consolidation, amalgamation, reorganization, reconstruction or other similar
arrangement of NTL or the person into which NTL is merged after the Issuance
Date or to which NTL conveys, transfers or leases its properties and assets
after the Issuance substantially as an entirety is required, as a consequence of
such Subsequent Consolidation and as a consequence of a Change in Tax Law in the
United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands occurring after the date of such Subsequent Consolidation to pay
Additional Amounts with respect to Deferred Coupon Notes with respect to
Withholding Tax and such Withholding Tax is imposed at a rate that exceeds the
rate, if any, at which Withholding Tax was or would have been imposed on the
date of such Subsequent Consolidation. This paragraph shall not apply to the
extent that, at the date of such Subsequent Consolidation it was known or would
have been known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law
in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands, was to occur after such date.
NTL will also pay, or make available for payment, to holders on the
redemption date any Additional Amounts resulting from the payment of such
redemption price.
TRANSACTIONS WITH AFFILIATES
The Deferred Coupon Note Indenture provides that NTL will not, and will not
permit any of its Restricted Subsidiaries to enter into an Affiliate
Transaction. This prohibits NTL and any Restricted Subsidiary to sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to NTL or the relevant Subsidiary than those that could have been
obtained in a comparable transaction by NTL or such Subsidiary
with an unrelated Person; and
(2) NTL delivers to the Deferred Coupon Note Trustee:
(a) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1.0 million or any series
of Affiliate Transactions with an Affiliate involving
aggregate payments in excess of $1.0 million, a resolution
of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction
complies with clause
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(1) above and such Affiliate Transaction is approved by a
majority of the disinterested directors on the Board of
Directors; and
(b) with respect to any Affiliate Transaction or any series of
Affiliate Transactions involving aggregate payments in
excess of $25.0 million, an opinion as to the fairness to
NTL or such Subsidiary from a financial point of view issued
by an investment banking firm of national standing with high
yield experience together with an Officers' Certificate to
the effect that such opinion complies with this clause (b);
provided, however, that notwithstanding the foregoing provisions, the following
shall not be deemed to be Affiliate Transactions:
(1) any employment agreement entered into by NTL or any of its
Subsidiaries in the ordinary course of business and consistent
with the past practice of NTL or its predecessor or such
Subsidiary;
(2) transactions between or among NTL and/or its Restricted
Subsidiaries;
(3) transactions permitted by the provisions of the Deferred Coupon
Note Indenture described above under the covenant "Restricted
Payments";
(4) Liens permitted under the Liens covenant which are granted by NTL
or any of its Subsidiaries to an unrelated Person for the benefit
of NTL or any other Subsidiary of NTL;
(5) any transaction pursuant to an agreement in effect on the
Issuance Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary where
such Indebtedness is owed to the holders of the Equity Interests
of such Restricted Subsidiary on a pro rata basis and on
substantially identical principal financial terms;
(7) management, operating, service or interconnect agreements entered
into in the ordinary course of business with any Cable Business
in which NTL or any Restricted Subsidiary has an Investment and
which is not a Cable Controlled Subsidiary, and of which no
Affiliate of NTL is an Affiliate other than as a result of such
Investment; and
(8) any tax sharing agreement.
REPORTS
Whether or not required by the rules and regulations of the SEC, so long as
any Deferred Coupon Notes are outstanding, NTL will file with the SEC and
furnish to the holders of Deferred Coupon Notes all quarterly and annual
financial information required to be contained in a filing with the SEC on Forms
10-Q and 10-K, or the equivalent of those reports under the Exchange Act for
foreign private issuers in the event NTL becomes a corporation organized under
the laws of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands, including a "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and, with
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respect to the annual information only, a report by NTL's certified independent
accountants, in each case, as required by the rules and regulations of the SEC
as in effect on the Issuance Date. NTL does not publish unconsolidated financial
reports.
EVENTS OF DEFAULT AND REMEDIES
The Deferred Coupon Note Indenture provides that each of the following
constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest and
Additional Amounts, if applicable, on the Deferred Coupon Notes;
(2) default in payment when due of principal on the Deferred Coupon
Notes;
(3) failure by NTL to comply with the provisions described under the
covenants "Change of Control", "Restricted Payments" or
"Incurrence of Indebtedness and Issuance of Preferred Stock";
(4) failure by NTL for 60 days after notice to comply with certain
other covenants and agreements contained in the Deferred Coupon
Note Indenture or the Deferred Coupon Notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by NTL or any of its
Restricted Subsidiaries, or the payment of which is guaranteed by
NTL or any of its Restricted Subsidiaries, whether such
Indebtedness or guarantee now exists, or is created after the
Issuance Date, which default:
(a) is caused by a failure to pay when due principal or
interest on such Indebtedness within the grace period
provided in such Indebtedness, which Payment Default
continues beyond any applicable grace period; or
(b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which
has been so accelerated, aggregates $10.0 million or more;
(6) failure by NTL or any Restricted Subsidiary of NTL to pay final
judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in
excess of $5.0 million, which judgments are not stayed within 60
days after their entry;
(7) certain events of bankruptcy or insolvency with respect to NTL or
any of its Material Subsidiaries; and
(8) the revocation of a Material License.
If any Event of Default occurs and is continuing, the Deferred Coupon Note
Trustee or the holders of at least 25% in Accreted Value (if prior to November
15, 2004) or principal amount (if on or after November 15, 2004), as applicable,
of the then outstanding
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Deferred Coupon Notes may declare all the Deferred Coupon Notes to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
NTL or any Material Subsidiary, all outstanding Deferred Coupon Notes will
become due and payable without further action or notice. Holders of the Deferred
Coupon Notes may not enforce the Deferred Coupon Note Indenture or the Deferred
Coupon Notes except as provided in the Deferred Coupon Note Indenture. Subject
to certain limitations, holders of a majority in principal amount at maturity of
outstanding Deferred Coupon Notes may direct the Deferred Coupon Note Trustee in
its exercise of any trust or power. The Deferred Coupon Note Trustee may
withhold from holders of the Deferred Coupon Notes notice of any continuing
Default or Event of Default, except a Default or Event of Default relating to
the payment of principal or interest, if it determines that withholding notice
is in their interest.
The holders of a majority in aggregate principal amount at maturity of each
class of Deferred Coupon Notes then outstanding by notice to the Deferred Coupon
Note Trustee may on behalf of the holders of all of the applicable class of
Deferred Coupon Notes waive any existing Default or Event of Default and its
consequences under the Deferred Coupon Note Indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Deferred Coupon Notes.
NTL is required to deliver to the Deferred Coupon Note Trustee annually a
statement regarding compliance with the Deferred Coupon Note Indenture, and NTL
is required, upon becoming aware of any Default or Event of Default, to deliver
to the Deferred Coupon Note Trustee a statement specifying such Default or Event
of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of NTL, as
such, shall have any liability for any Obligations of NTL under the Deferred
Coupon Notes or the Deferred Coupon Note Indenture or for any claim based on, in
respect of, or by reason of, such Obligations or their creation. Each holder of
the Deferred Coupon Notes by accepting a Deferred Coupon Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Deferred Coupon Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws, and it is the
view of the SEC that a waiver of such liabilities is against public policy.
DEFEASANCE AND DISCHARGE OF THE DEFERRED COUPON NOTE INDENTURE AND THE DEFERRED
COUPON NOTES
NTL may cause the defeasance of the Deferred Coupon Notes if NTL
irrevocably deposits, or causes to be deposited, in trust with the Deferred
Coupon Note Trustee or the paying agent, at any time prior to the stated
maturity of the notes or the date of redemption of all the outstanding Deferred
Coupon Notes, as trust funds in trust, money or direct noncallable obligations
of or guaranteed by the United States of America in an amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants,
without reinvestment thereof, to pay timely and discharge all amounts payable in
respect of Accreted Value (if prior to November 15, 2004) or principal amount
(if on or after
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November 15, 2004), of the then outstanding Deferred Coupon Notes and all
interest due thereon to maturity or redemption. The indenture will then cease to
be of further effect as to all outstanding Deferred Coupon Notes except, among
other things, as to:
(1) remaining rights of registration of transfer and substitution and
exchange of the Deferred Coupon Notes of such class;
(2) rights of holders to receive payment of principal of and interest
on the Deferred Coupon Notes; and
(3) the rights, obligations and immunities of the Deferred Coupon
Note Trustee.
In order to exercise Defeasance:
(1) NTL shall have delivered to the Deferred Coupon Note Trustee an
Opinion of Counsel reasonably acceptable to the Deferred Coupon
Note Trustee confirming that:
(a) NTL has received from, or there has been published by, the
Internal Revenue Service, a ruling; or
(b) since the date of the Deferred Coupon Note Indenture, there
has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon, such
Opinion of Counsel shall confirm that the holders of the
outstanding Deferred Coupon Notes will not recognize
income, gain or loss for federal income tax purposes as a
result of such Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at
the same times as would have been the case if such
Defeasance had not occurred;
(2) no Event of Default shall have occurred and be continuing on the
date of such deposit, other than an Event of Default resulting
from the borrowing of funds to be applied to such deposit, or
insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(3) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument
(other than the Deferred Coupon Note Indenture) to which NTL or
any of its Subsidiaries is a party or by which NTL or any of its
Subsidiaries is bound;
(4) NTL shall have delivered to the trustee an Opinion of Counsel to
the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(5) NTL shall have delivered to the Deferred Coupon Note Trustee an
Officers' Certificate stating that the deposit was not made by
NTL with the intent of preferring the holders of the Deferred
Coupon Notes over the other creditors of NTL with the intent of
defeating, hindering, delaying or defrauding creditors of NTL or
others;
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(6) the deposit shall not result in NTL, the Deferred Coupon Note
Trustee or the trust being subject to the Investment Company Act
of 1940;
(7) holders of the Deferred Coupon Notes will have a valid, perfected
and unavoidable, under applicable bankruptcy or insolvency laws,
subject to the passage of time referred to in clause (4) above,
first priority security interest in the trust funds; and
(8) NTL shall have delivered to the Deferred Coupon Note Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent relating to the Defeasance have
been complied with.
UNCLAIMED MONEY, PRESCRIPTION
If money deposited with the Deferred Coupon Note Trustee or paying agent
for the payment of principal or interest remains unclaimed for two years, the
Deferred Coupon Note Trustee and the paying agent shall pay the money back to
NTL at its written request. After that, holders of Deferred Coupon Notes
entitled to the money must look to NTL for payment unless an abandoned property
law designates another person and all liability of the Deferred Coupon Note
Trustee and the paying agent shall cease. Other than as set forth in this
paragraph, the Deferred Coupon Note Indenture does not provide for any
prescription period for the payment of interest and principal on the Deferred
Coupon Notes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the Deferred Coupon Notes in
accordance with procedures described in "Book-Entry; Delivery and Form". The
registrar and the Deferred Coupon Note Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and NTL may
require a holder to pay any taxes and fees required by law or permitted by the
Deferred Coupon Note Indenture. NTL is not required to transfer or exchange any
Deferred Coupon Note selected for redemption. Also, NTL is not required to
transfer or exchange any Deferred Coupon Note for a period of 15 days before a
selection of Deferred Coupon Notes to be redeemed. All transfers or exchanges of
certificated notes may be effected at the offices of the transfer agent in
Luxembourg.
The registered holder of a Deferred Coupon Note will be treated as the
owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Deferred Coupon
Note Indenture or the Deferred Coupon Notes may be amended or supplemented with
the consent of the holders of at least a majority in principal amount at
maturity of the then outstanding Deferred Coupon Notes, including consents
obtained in connection with a tender offer or exchange offer for the Deferred
Coupon Notes, and any existing default or compliance with any provision of the
Deferred Coupon Note Indenture or the Deferred Coupon Notes may be waived with
the consent of the holders of a majority in principal
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amount at maturity of the then outstanding Deferred Coupon Notes, including
consents obtained in connection with a tender offer or exchange offer for the
Deferred Coupon Notes.
Without the consent of each holder affected, an amendment or waiver may
not, with respect to any Deferred Coupon Notes held by a non-consenting holder
of Deferred Coupon Notes:
(1) reduce the amount of Deferred Coupon Notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Deferred Coupon Note or alter the provisions with respect to the
redemption of the Deferred Coupon Notes, except for repurchases
of the Deferred Coupon Notes pursuant to the covenants described
above under the captions "-- Asset Sale" and "-- Change of
Control";
(3) reduce the rate of or change the time for payment of interest on
any Deferred Coupon Note,
(4) waive a default in the payment of principal of or interest on any
Deferred Coupon Notes, except a rescission of acceleration of the
Deferred Coupon Notes by the holders of at least a majority in
aggregate principal amount of the Deferred Coupon Notes and a
waiver of the payment default that resulted from such
acceleration;
(5) make any Deferred Coupon Note payable in money other than that
stated in the Deferred Coupon Notes;
(6) make any change in the provisions of the Deferred Coupon Note
Indenture relating to waivers of past Defaults or the rights of
holders of Deferred Coupon Notes to receive payments of principal
of or interest on the Deferred Coupon Notes;
(7) waive a redemption payment with respect to any Deferred Coupon
Note; or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of
Deferred Coupon Notes, NTL and the Deferred Coupon Note Trustee may amend or
supplement the Deferred Coupon Note Indenture or the Deferred Coupon Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated notes
in addition to or in place of certificated notes, to provide for the assumption
of NTL's obligations to holders of the Deferred Coupon Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of the Deferred Coupon Notes or that does not
adversely affect the legal rights under the Deferred Coupon Note Indenture of
any such holder, or to comply with requirements of the SEC in order to maintain
the qualification of the Deferred Coupon Note Indenture under the Trust
Indenture Act.
Any notice or communication to a holder of Deferred Coupon Notes shall be
mailed by first-class mail to such holder's address as shown in the register
kept by the registrar. If a notice or communication is mailed in the manner
provided in the preceding sentence within the time period prescribed, it is duly
given, whether or not the addressee receives it.
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If the Deferred Coupon Notes are listed on the Luxembourg Stock Exchange, NTL
will publish a notice in a daily newspaper with general circulation in
Luxembourg.
GOVERNING LAW AND JUDGMENTS
The Deferred Coupon Notes and the Deferred Coupon Note Indenture will be
governed exclusively by the laws of the State of New York. Under the Judiciary
Law of the State of New York, a judgment or decree in an action based upon an
obligation denominated in a currency other than U.S. dollars will be rendered in
the foreign currency of the underlying obligation and converted into U.S.
dollars at a rate of exchange prevailing on the date of the entry of the
judgment or decree.
CONCERNING THE DEFERRED COUPON NOTE TRUSTEE
The Deferred Coupon Note Indenture contains limitations on the rights of
the Deferred Coupon Note Trustee, should it become a creditor of NTL, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Deferred Coupon Note
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
The Deferred Coupon Note Indenture will provide that the holders of a
majority in Accreted Value (if prior to November 15, 2004) or principal amount
(if on or after November 15, 2004), as applicable, of the then outstanding
Deferred Coupon Notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Deferred
Coupon Note Trustee under the Deferred Coupon Note Indenture, subject to certain
exceptions. The Deferred Coupon Note Indenture provides that in case an Event of
Default shall occur, which shall not be cured, the Deferred Coupon Note Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. The Deferred Coupon Note
Indenture will provide that subject to such provisions, the Deferred Coupon Note
Trustee will be under no obligation to exercise any of its rights or powers
under the Deferred Coupon Note Indenture at the request of any holder of
Deferred Coupon Notes, unless such holder shall have offered to the Deferred
Coupon Note Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
The Chase Manhattan Bank is also the trustee for all of the Existing Notes
and the Convertible Notes.
LISTING
Application has been made to list the Deferred Coupon Notes on the
Luxembourg Stock Exchange. The legal notice relating to the issue of the
Deferred Coupon Notes and the articles of association of NTL will be registered
prior to the listing with the Registrar of the District Court in Luxembourg,
where such documents are available for inspection and where copies thereof can
be obtained upon request. In addition, as long as the Deferred Coupon Notes are
listed on the Luxembourg Stock Exchange, an agent for making payments on, and
transfers of, Deferred Coupon Notes will be maintained in Luxembourg. NTL has
initially designated Chase Manhattan Bank Luxembourg S.A. as its agent for such
purposes.
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BOOK-ENTRY; DELIVERY AND FORM
All certificates representing the notes will be issued in fully registered
form without interest coupons. The notes sold in offshore transactions in
reliance on Regulation S under the Securities Act are represented by one or more
global notes in definitive, fully registered form, without interest coupons
(each a "Regulation S Global Note"), deposited with the applicable trustee, as
common depositary for, and registered in the name of a nominee of, Euroclear and
Cedelbank.
Notes sold in reliance on Rule 144A are represented by either (1) one or
more permanent global notes in definitive, fully registered form without
interest coupons (each a "Euroclear Restricted Global Note" and were deposited
with the applicable trustee as depositary for, and registered in the name of a
nominee of, Euroclear or (2) one or more permanent global notes in definitive,
fully registered form without interest coupons (each a "DTC Restricted Global
Note") and were deposited with the applicable trustee as custodian for, a
registered in the name of a nominee of DTC.
Notes issued in exchange (1) for the Regulation S Global Notes will be
represented by one or more permanent global notes in definitive, fully
registered form without interest coupons and deposited with the applicable
trustee as common depositary for, and registered in the name of, Euroclear and
Cedelbank, (2) for the Euroclear Restricted Global Notes, will be represented by
one or more permanent global notes in definitive fully registered form without
interest coupons and deposited with the applicable trustee as depositary for,
and registered in the name of a nominee of Euroclear, and (3) for the DTC
Restricted Global Notes, will be represented by one or more permanent global
notes in fully registered form without interest coupons and deposited with the
applicable trustee custodian for, and registered in the name of a nominee of
DTC. Each of the global notes so issued in exchange are referred to a Global
Notes.
Ownership of beneficial interests in a Global Note is limited to persons
who have accounts with DTC or Euroclear and Cedelbank ("participants"), or
persons who hold interests through participants. Ownership of beneficial
interests in a Global Note is shown on, and the transfer of that ownership is
effected only through, records maintained by DTC, Euroclear or Cedelbank, as
applicable, or their respective nominees (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified institutional buyers may hold their
interests in a Restricted Global Note, directly through DTC, if they are
participants in such system, or indirectly through organizations which are
participants in such system.
Note holders may hold their interests in a Regulation S Global Note,
directly through Euroclear or Cedelbank, if they are participants in such
systems, or indirectly through organizations that are participants in such
systems.
So long as DTC, Euroclear or Cedelbank, as applicable, or any nominee, is
the registered owner or holder of a Global Note, DTC, Euroclear or Cedelbank, or
such nominee, as the case may be, will be considered the sole owner or holder of
the notes represented by such Global Note for all purposes under the indentures
pursuant to which the notes were issued. No beneficial owner of an interest in a
Global Note is permitted to
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transfer that interest except in accordance with DTC's, Euroclear's or
Cedelbank's applicable procedures, in addition to those provided for under the
indentures.
Payments made with respect to a Global Note are made to DTC, Euroclear or
Cedelbank, as applicable, or their nominees, as the registered owner thereof.
Neither NTL, the trustee nor any paying agent has any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
We expect that DTC, Euroclear or Cedelbank, as applicable, or their
nominees, upon receipt of any payment in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in such Global Note as shown on their respective
records. We also expect that payments by participants to owners of beneficial
interests in such Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
All amounts payable under the notes are payable in Euro, except as may
otherwise be agreed between any applicable securities clearing system and any
holders and except as otherwise provided below. Payments are subject in all
cases to any fiscal or other laws and regulations applicable thereto. None of
NTL, the trustee or any paying agent shall be liable to any holder of a global
note or other person for any commissions, costs, losses or expenses in relation
to or resulting from any currency conversion or rounding effected in connection
therewith.
Qualified institutional buyers who hold beneficial interests in a note,
directly or indirectly, through DTC (a "DTC Global Note") will be paid in U.S.
dollars converted from such payments in Euro by the paying agent unless the
registered holder, on behalf of any such owner of beneficial interests, elects
to receive payments in Euro. All costs of conversion, if any, will be borne by
holders of beneficial interests in the DTC Global Notes, by deduction from such
payments.
An owner of a beneficial interest in a DTC Global Note may receive payment
in Euro by notifying the DTC participant through which its beneficial interest
in the DTC Global Note is held on or prior to the record date of (1) such
investor's election to receive payment in Euro and (2) wire transfer
instructions to an account entitled to receive the relevant payment. If complete
instructions are received by the DTC participant and forwarded by the DTC
participant to DTC and by DTC to the paying agent, each in a timely manner, such
investor will receive payment in Euro outside DTC; otherwise only U.S. dollar
payments will be made by the paying agent. All costs of such payment by wire
transfer will be borne by registered holders receiving such payments by
deduction from such payments.
Holders may be subject to foreign exchange risks that may have important
economic and tax consequences to them.
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Transfers between participants in DTC are effected in accordance with DTC's
procedures, and are settled in same-day funds. Transfers between participants in
Euroclear and Cedel Bank are effected in the ordinary way in accordance with
their respective rules and operating procedures. Transactions settled through
DTC, Euroclear and Cedelbank are settled on a T+3 basis.
We expect that DTC, Euroclear or Cedelbank, as applicable, will take any
action permitted to be taken by a holder of notes (including the presentation of
notes for exchange) only at the direction of one or more participants to whose
account the interest in a Global Note is credited and only in respect of such
portion of the securities as to which such participant or participants has or
have given such direction. However, if there is an Event of Default under the
notes, each of DTC, Euroclear or Cedelbank, as applicable, will exchange the
applicable Global Notes for certificated notes which it will distribute to its
participants.
We understand that: DTC is a limited purpose trust company organized under
the laws of the State of New York, a "banking organization" within the meaning
of New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "Clearing
Agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
We understand that: Euroclear and Cedelbank hold securities for
participating organizations and facilitate the clearance and settlement of
securities transactions between their respective participants through electronic
book-entry changes in accounts of such participants. Euroclear and Cedelbank
provide to their participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Euroclear and Cedelbank interface with
domestic securities markets. Euroclear and Cedelbank participant are financial
institutions such as underwriters, securities brokers and dealers, banks, trust
companies and certain other organizations. Indirect access to Euroclear or
Cedelbank is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodian relationship with a
Euroclear or Cedelbank participant, either directly or indirectly.
Subject to compliance with the transfer restrictions applicable to the
Global Notes, cross-market transfers between the participants in DTC, on the one
hand, and Euroclear or Cedelbank participants, on the other hand, are effected
through DTC in accordance with DTC's rules on behalf of each of Euroclear or
Cedelbank by its common depositary; however, such cross-market transactions
require delivery of instructions to Euroclear or Cedelbank by the counterparty
in such system in accordance with the rules and procedures
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and within the established deadlines (Brussels time) of such system. Euroclear
or Cedelbank will, if the transaction meets its settlement requirements, deliver
instructions to its common depositary to take action to effect final settlement
on its behalf by delivering or receiving interests in the Global Notes in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and
Cedelbank participants may not deliver instructions directly to the common
depositary for Euroclear or Cedelbank.
Because of time zone differences, the securities account of a Euroclear or
Cedelbank participant purchasing an interest in a Global Note from a participant
in DTC are credited and any such crediting is reported to the relevant Euroclear
or Cedelbank participant, during the securities settlement processing day (which
must be a business day for Euroclear and Cedelbank) immediately following the
settlement date of DTC. Cash received in Euroclear or Cedelbank as a result of
sales of interest in a Global Note by or through a Euroclear or Cedelbank
participant to a participant in DTC are received with value on the settlement
date of DTC but are available in the relevant Euroclear or Cedelbank cash
account only as of the business day for Euroclear or Cedelbank following DTC's
settlement date.
Although DTC, Euroclear and Cedelbank are expected to continue to follow
the foregoing procedures in order to facilitate transfers of interests in a
Global Note among participants of DTC, Euroclear and Cedelbank, as the case may
be, they are under no obligation to continue to perform such procedures, and
such procedures may be discontinued at any time. None of NTL, the trustee or any
paying agent has any responsibility for the performance by DTC, Euroclear or
Cedelbank or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary, or
Euroclear and Cedelbank cease to be a clearing agency, for the Global Notes and
a successor depositary or clearing agency is not appointed by us within 90 days,
we will issue certificated notes in exchange for the Global Notes. Holders of an
interest in a Global Note may receive certificated notes in accordance with
DTC's rules and procedures in addition to those provided for under the
indentures.
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DEFINITIONS
Set forth below are selected defined terms used in the 2009 Note Indenture,
the 2006 Note Indenture and the Deferred Coupon Note Indenture collectively the
"Indentures". Reference is made to the Indentures for a full definition of all
terms, as well as any other capitalized terms used in the descriptions of the
notes for which no definition is provided.
"Accreted Value" means, as of any date of determination prior to November
15, 2004, with respect to any Deferred Coupon Note, the sum of
(a) the initial offering price (which shall be calculated by discounting
the aggregate principal amount at maturity of such note, at a rate of
11 1/2% per annum, compounded semiannually on each May 15 and
November 15, from November 15, 2004 to the date of issuance) of such
note, and
(b) the portion of the excess of the principal amount of such note over
such initial offering price which shall have been accreted thereon
through such date, such amount to be so accreted on a daily basis at
a rate of 11 1/2% per annum of the initial offering price of a note
compounded semiannually on each May 15 and November 15 from the date
of issuance of the note through the date of determination, computed
on the basis of a 360-day year of twelve 30-day months.
"Acquired Debt" means, with respect to any specified Person, Indebtedness
of any other Person (the "Acquired Person") existing at the time such Acquired
Person merged with or into or became a Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, such
Acquired Person merging with or into or becoming a Subsidiary of such specified
Person.
"Acquired Person" has the meaning specified in the definition of Acquired
Debt.
"Adjusted Total Assets" means the total amount of assets of NTL and its
Restricted Subsidiaries, including the amount of any Investment in any
Non-Restricted Subsidiary, except to the extent resulting from write-ups of
assets, other than write-ups in connection with accounting for acquisitions in
conformity with GAAP, after deducting therefrom
(1) all current liabilities of NTL and its Restricted Subsidiaries,
and
(2) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as
calculated in conformity with GAAP.
For purposes of this Adjusted Total Assets definition,
(a) assets shall be calculated less applicable accumulated
depreciation, accumulated amortization and other valuation
reserves, and
(b) all calculations shall exclude all intercompany items.
"Adjusted Total Controlled Assets" means the total amount of assets of NTL
and its Cable Controlled Subsidiaries, except to the extent resulting from
write-ups of assets, other than write-ups in connection with accounting for
acquisitions in conformity with GAAP, after deducting therefrom
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(1) all current liabilities of NTL and such Cable Controlled
Subsidiaries; and
(2) all goodwill, trade names, trademarks, patients, unamortized debt
discount and expense and other like intangibles of NTL and such
Restricted Subsidiaries, all as calculated in conformity with
GAAP;
provided that Adjusted Total Controlled Assets shall be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal to the
aggregate amount of all Investments of NTL or any such Cable Controlled
Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash
Equivalents. For purposes of this Adjusted Total Controlled Assets definition,
(a) assets shall be calculated less applicable accumulated
depreciation, accumulated amortization and other valuation
reserves, and
(b) all calculations shall exclude all intercompany items.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control",
including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with", as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Annualized Pro Forma EBITDA" means, with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"Asset Sale" means
(1) any sale, lease, transfer, conveyance or other disposition of any
assets, including by way of a sale-and-leaseback, other than the
sale or transfer of inventory or goods held for sale in the
ordinary course of business, provided that the sale, lease,
transfer, conveyance or other disposition of all or substantially
all of the assets of NTL shall be governed by the provisions of
the Indentures described under the captions "Change of Control"
or "Merger, Consolidation or Sale of Assets" or
(2) any issuance, sale, lease, transfer, conveyance or other
disposition of any Equity Interests of any of the NTL's
Restricted Subsidiaries to any Person;
in either case other than
(a) to
(A) NTL,
(B) any Wholly Owned Subsidiary, or
(C) any Subsidiary which is a Subsidiary of NTL on the
Issuance Date provided that at the time of and after
giving effect to such
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issuance, sale, lease, transfer, conveyance or other
disposition to such Subsidiary, NTL's ownership
percentage in such Subsidiary is equal to or greater
than such percentage on the Issuance Date or
(b) the issuance, sale, transfer, conveyance or other
disposition of Equity Interests of a Subsidiary in exchange
for capital contributions made on a pro rata basis by the
holders of the Equity Interests of such Subsidiary.
"Cable Assets" means tangible or intangible assets, licenses, including,
without limitation, Licenses, and computer software used in connection with a
Cable Business.
"Cable Business" means
(i) any Person directly or indirectly operating, or owning a license
to operate, a cable and/or television and/or telephone and/or
telecommunications system or service principally within the
United Kingdom and/or the Republic of Ireland and
(ii) any Cable Related Business.
"Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable
Asset held by a Cable Controlled Subsidiary.
"Cable Controlled Subsidiary" means any Restricted Subsidiary which is
primarily engaged, directly or indirectly, in one or more Cable Businesses.
"Cable Related Business" means a Person which directly or indirectly owns
or provides a service or product used in a Cable Business, including, without
limitation, any television programming, production and/or licensing business or
any programming guide or telephone directory business or content or software
related thereto.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents, however designated, of corporate stock, including, without
limitation, partnership interests.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds,
including from the sale of any property received for the Capital Stock or the
fair market value of such property, as determined by an independent appraisal
firm, received by NTL or any Subsidiary of NTL from the issue or sale, other
than to a Subsidiary, by NTL of any class of its Capital Stock after October 14,
1993, including Capital Stock of NTL issued after October 14, 1993 upon
conversion of or in exchange for other securities of NTL.
"Cash Equivalents" means
(1) Permitted Currency,
(2) securities issued or directly and fully guaranteed or insured by
the United States government, a European Union member government
or any agency or instrumentality thereof having maturities of not
more than six months and two days from the date of acquisition,
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(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any commercial bank(s)
domiciled in the United States, the United Kingdom, the Republic
of Ireland or any other European Union member having capital and
surplus in excess of $500.0 million,
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2)
and (3) entered into with any financial institution meeting the
qualifications specified in clause (3) above,
(5) commercial paper rated P-1 or the equivalent thereof by Moody's
or A-1 or the equivalent thereof by S&P and in each case maturing
within six months and two days after the date of acquisition and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1)-(5) of
this definition.
"Change of Control" means
(1) the sale, lease or transfer of all or substantially all of the
assets of NTL to any "Person" or "group", within the meaning of
Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any
group acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act, other than any Permitted Holder,
(2) the approval by the requisite stockholders of NTL of a plan of
liquidation or dissolution of NTL,
(3) any "Person" or "group", within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act or any successor provision to either
of the foregoing, including any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act, other than any
Permitted Holder, becomes the "beneficial owner", as defined in
Rule 13d-3 under the Exchange Act, of more than 50% of the total
voting power of all classes of the voting stock of NTL and/or
warrants or options to acquire such voting stock, calculated on a
fully diluted basis, unless, as a result of such transaction, the
ultimate direct or indirect ownership of NTL is substantially the
same immediately after such transaction as it was immediately
prior to such transaction, or
(4) during any period of two consecutive years, individuals who at
the beginning of such period constituted NTL's Board of
Directors, together with any new directors whose election or
appointment by such board or whose nomination for election by the
shareholders of NTL was approved by a vote of a majority of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination
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for election was previously so approved, cease for any reason to
constitute a majority of NTL's Board of Directors then in office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Ratings Decline.
"Consolidated Interest Expense" means, for any Person, for any period, the
amount of interest in respect of Indebtedness, including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness, the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled to
be paid or accrued by such Person and its Subsidiaries, other than
Non-Restricted Subsidiaries, during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in such
capital lease obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries, other than
Non-Restricted Subsidiaries, for such period, on a consolidated basis,
determined in accordance with GAAP; provided, that
(1) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Wholly Owned
Subsidiary,
(2) the Net Income of any Person that is a Subsidiary, other than a
Subsidiary of which at least 80% of the Capital Stock having
ordinary voting power for the election of directors or other
governing body of such Subsidiary is owned by the referent Person
directly or indirectly through one or more Subsidiaries, shall be
included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Wholly Owned
Subsidiary,
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded and
(4) the cumulative effect of a change in accounting principles shall
be excluded.
"Convertible Subordinated Notes" means NTL's 7% Convertible Subordinated
Notes due 2008 issued pursuant to an indenture dated as of December 16, 1998
also between NTL and The Chase Manhattan Bank, as trustee.
"Credit Facility" means the Facilities Agreement dated October 17, 1997
between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as
arranger, Chase Manhattan International Limited, as agent and security trustee
and The Chase Manhattan
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Bank as issuer, as such Facilities Agreement may be supplemented, amended,
restated, modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time in an aggregate outstanding principal amount not to
exceed the greater of
(1) L555.0 million and
(2) the amount of the aggregate commitments thereunder as the same
may be increased after March 13, 1998 as contemplated by the
Facilities Agreement as amended or supplemented to March 13,
1998, but in no event greater than L875.0 million, less, in each
case, the aggregate amount of all Net Proceeds of Asset Sales
that have been applied to permanently reduce Indebtedness under
the Credit Facility pursuant to the covenant described above
under "-- Asset Sale".
Indebtedness that may otherwise be incurred under the indenture may, but need
not, be incurred under the Credit Facility without regard to the limit set forth
in the preceding sentence. Indebtedness outstanding under the Credit Facility on
the date of the indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (a) of the second paragraph of the
covenant described above under "-- Incurrence of Indebtedness and Issuance of
Preferred Stock".
"Cumulative EBITDA" means the cumulative EBITDA of NTL from and after the
Issuance Date to the end of the fiscal quarter immediately preceding the date of
a proposed Restricted Payment, or, if such cumulative EBITDA for such period is
negative, minus the amount by which such cumulative EBITDA is less than zero;
provided, however, that EBITDA of Non-Restricted Subsidiaries shall not be
included.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by NTL from
the Issuance Date to the end of the fiscal quarter immediately preceding a
proposed Restricted Payment, determined on a consolidated basis in accordance
with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Diamond Notes" means the 10% Diamond Senior Notes due 2008, the 9 1/8%
Diamond Senior Notes due 2008, the 10 3/4% Diamond Senior Discount Notes due
2007, the 11 3/4% Diamond Senior Discount Notes due 2005 and the 13 1/4% Diamond
Senior Discount Notes due 2004.
"Disqualified Stock" means any Capital Stock which, by its terms, or by the
terms of any security into which it is convertible or for which it is
exchangeable, or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the notes mature.
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"EBITDA" means, for any Person, for any period, an amount equal to
(1) the sum of
(a) Consolidated Net Income for such period, exclusive of any
gain or loss realized in such period upon an Asset Sale,
plus
(b) the provision for taxes for such period based on income
or profits to the extent such income or profits were
included in computing Consolidated Net Income and any
provision for taxes utilized in computing net loss under
clause (a) hereof, plus
(c) Consolidated Interest Expense for such period, plus
(d) depreciation for such period on a consolidated basis,
plus
(e) amortization of intangibles for such period on a
consolidated basis, plus
(f) any other non-cash item reducing Consolidated Net Income
for such period, excluding any such non-cash item to the
extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period,
minus
(2) all non-cash items increasing Consolidated Net Income for such
period, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any Indebtedness that is
convertible into, or exchangeable for, Capital Stock.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office as operator of the Euroclear system.
"European Union member" means any country that is or becomes a member of
the European Union or any successor organization thereto.
"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange rates.
An Exchange Rate Contract may also include an Interest Rate Agreement.
"Existing Indebtedness" means Indebtedness of NTL and its Subsidiaries in
existence on the Issuance Date, until such amounts are repaid, including,
without limitation, the Existing Notes.
"Existing Notes" means the Old Notes and the Convertible Subordinated
Notes.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date and are applied on a consistent basis.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
reimbursement agreements in respect thereof, or representing the balance
deferred and unpaid of the purchase price of any property, including pursuant to
capital leases and sale-and-leaseback transactions, or representing any hedging
obligations under an Exchange Rate Contract or an Interest Rate Agreement,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness, other than obligations
under an Exchange Rate Contract or an Interest Rate Agreement, would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, the Guarantee of items
which would be included within this definition. The amount of any Indebtedness
outstanding as of any date shall be the accreted value thereof, in the case of
any Indebtedness issued with original issue discount.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement the principal purpose of which is to protect the
party indicated therein against fluctuations in interest rates.
"Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's. In the event that NTL shall
be permitted to select any other Rating Agency, the equivalent of such ratings
by such Rating Agency shall be used.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates, in the forms of loans, including
Guarantees, advances or capital contributions, excluding commission, travel and
similar advances and loans, joint property ownership and other arrangements, in
each case, made to officers and employees made in the ordinary course of
business, purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issuance Date" means the date on which the notes are first authenticated
and issued.
"License" means any license issued or awarded pursuant to the Broadcasting
Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984
or the Wireless Telegraphy Act 1948, in each case, as such Acts may, from time
to time be,
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amended, modified or re-enacted, or equivalent statutes of any jurisdiction, to
operate or own a Cable Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code, or equivalent or successor statutes, of any
jurisdiction.
"Material License" means a License held by NTL or any of its Subsidiaries
which License at the time of determination covers a number of Net Households
which equals or exceeds 5% of the aggregate number of Net Households covered by
all of the Licenses held by NTL and its Subsidiaries at such time.
"Material Subsidiary" means
(1) NTL UK Group, Inc., formerly known as OCOM Sub II, Inc., NTLIH,
NTL Group Limited, CableTel Surrey Limited, CableTel Cardiff
Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees
and
(2) any other Subsidiary of NTL which is a "significant subsidiary"
as defined in Rule 1-02(v) of Regulation S-X under the Securities
Act and the Exchange Act, as such Regulation is in effect on the
date of the indenture.
"Monetize" means a strategy with respect to Equity Interests that generates
an amount of cash equal to the fair value of such Equity Interests.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Households" means the product of
(1) the number of households covered by a License in the United
Kingdom and
(2) the percentage of the entity holding such License which is owned
directly or indirectly by NTL.
"Net Income" means, with respect to any Person for a specific period, the
net income (loss) of such Person during such period, determined in accordance
with GAAP, excluding, however, any gain, but not loss, during such period,
together with any related provision for taxes on such gain, but not loss,
realized during such period in connection with any Asset Sale, including,
without limitation, dispositions pursuant to sale-and-leaseback transactions,
and excluding any extraordinary gain, but not loss, during such period, together
with any related provision for taxes on such extraordinary gain, but not loss.
"Net Proceeds" means the aggregate cash proceeds received by NTL or any of
its Subsidiaries in respect of any Asset Sale, net of the direct costs relating
to such Asset Sale, including, without limitation, legal, accounting and
investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, after
taking into account any available tax credits or deductions and any tax sharing
arrangements, amounts required to be applied to the repayment of
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Indebtedness secured by a Lien on the asset or assets the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets.
"Non-Controlled Subsidiary" means an entity which is not a Cable Controlled
Subsidiary.
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as
to which none of NTL, nor any Restricted Subsidiary:
(1) provides credit support, including any undertaking, agreement or
instrument which would constitute Indebtedness;
(2) is directly or indirectly liable; or
(3) constitutes the lender.
"Non-Restricted Subsidiary" means
(1) a Subsidiary that
(a) at the time of its designation by the Board of Directors as
a Non-Restricted Subsidiary has not acquired any assets,
other than as specifically permitted by clause (5) of
"Permitted investments" or by the "Restricted payments"
covenant, at any previous time, directly or indirectly from
the Company or any of its Restricted Subsidiaries,
(b) has no Indebtedness other than Non-Recourse Debt and
(c) that at the time of such designation, after giving pro forma
effect to such designation, the ratio of Indebtedness to
Annualized Pro Forma EBITDA of NTL is equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA of
NTL immediately preceding such designation, provided,
however, that if the ratio of Indebtedness to Annualized Pro
Forma EBITDA of NTL immediately preceding such designation
is 6:1 or less, then the ratio of Indebtedness to Annualized
Pro Forma EBITDA of NTL may be 0.5 greater than such ratio
immediately preceding such designation;
(2) any Subsidiary which
(a) has been acquired or capitalized out of or by Equity
Interests of NTL or Capital Stock Sales Proceeds therefrom,
(b) has no Indebtedness other than Non-Recourse Debt and
(c) is designated as a Non-Restricted Subsidiary by the Board of
Directors or is merged, amalgamated or consolidated with or
into, or its assets or capital stock is to be transferred
to, a Non-Restricted Subsidiary; or
(3) any Subsidiary of a Non-Restricted Subsidiary.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Old Notes" means the 12 3/8% notes, the 11 1/2% notes, the 12 3/4% notes,
the 11 1/2% deferred coupon notes, the 10 3/4% notes, the 10% notes, the 9 3/4%
notes, the 1999 9 3/4 notes and the 9 1/2% notes.
"Other Qualified Notes" means any outstanding senior indebtedness of NTL
issued pursuant to an indenture having a provision substantially similar to the
Asset Sale Offer provision contained in the indentures, including, without
limitation, the 2006 Notes, the 2009 Notes and the Deferred Coupon Notes, as
applicable, the 12 3/8% notes, the 11 1/2% notes, the 12 3/4% notes, the 11 1/2%
deferred coupon notes, the 10 3/4% notes, the 10% notes, the 9 3/4% notes, the
1999 9 3/4 notes, the 9 1/2% notes and the Diamond Notes.
"Permitted Acquired Debt" means, with respect to any Acquired Person,
including, for this purpose, any Non-Restricted Subsidiary at the time such
Non-Restricted Subsidiary becomes a Restricted Subsidiary, Acquired Debt of such
Acquired Person and its Subsidiaries in an amount, determined on a consolidated
basis, not exceeding the sum of
(1) amount of the gross book value of property, plant and equipment
of the Acquired Person and its Subsidiaries as set forth on the
most recent consolidated balance sheet of the Acquired Person,
which may be unaudited, prior to the date it becomes an Acquired
Person and
(2) the aggregate amount of any Cash Equivalents held by such
Acquired Person at the time it becomes an Acquired Person.
"Permitted Currency" means the lawful currency of the United States or a
European Union member.
"Permitted Designee" means
(1) a spouse or a child of a Permitted Holder,
(2) trusts for the benefit of a Permitted Holder or a spouse or child
of a Permitted Holder,
(3) in the event of the death or incompetence of a Permitted Holder,
his estate, heirs, executor, administrator, committee or other
personal representative or
(4) any Person so long as a Permitted Holder owns at least 50% of the
voting power of all classes of the voting stock of such Person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
"Permitted Investments" means
(1) any Investments in NTL or in a Cable Controlled Property or in a
Qualified Subsidiary, including, without limitation,
(a) Guarantees of Indebtedness of NTL, a Cable Controlled
Subsidiary or a Qualified Subsidiary,
(b) Liens securing such Indebtedness or Guarantees or
(c) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary;
(2) any Investments in Cash Equivalents;
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(3) Investments by NTL in Indebtedness of a counter-party to an
Exchange Rate Contract for hedging a Permitted Currency exchange
risk that are made, for purposes other than speculation, in
connection with such contract to hedge not more than the
aggregate principal amount of the Indebtedness being hedged, or,
in the case of Indebtedness issued with original issue discount,
based on the amounts payable after the amortization of such
discount;
(4) Investments by NTL or any Subsidiary of NTL in a Person, if as a
result of such Investment
(a) such Person becomes a Cable Controlled Subsidiary or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its
assets to, or is liquidated into, NTL or a Wholly Owned
Subsidiary of NTL; and
(5) any issuance, transfer or other conveyance of Equity Interests in
NTL, or any Capital Stock Sales Proceeds therefrom, to a
Subsidiary of NTL.
"Permitted Liens" means
(1) Liens in favor of NTL;
(2) Liens on property of a Person existing at the time such Person is
merged into or consolidated with NTL or any Subsidiary of NTL;
provided, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not secure
any property or assets of NTL or any of its Subsidiaries other
than the property or assets subject to the Liens prior to such
merger or consolidation;
(3) liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due or are being contested in good faith and by
appropriate proceedings;
(4) Liens existing on the Issuance Date;
(5) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and
diligently concluded; provided, that any reserve or other
appropriate provision as shall be required in conformity with
GAAP shall have been made therefor and
(6) easements, rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties or
minor imperfections of title that, in the aggregate, are not
material in amount, and do not in any case materially detract
from the properties subject thereto or interfere with the
ordinary conduct of the business of NTL or its Restricted
Subsidiaries.
"Permitted Non-Controlled Assets" means Equity Interests in any Person
primarily engaged, directly or indirectly, in one or more Cable Businesses if
such Equity Interests
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(1) were acquired by NTL or any of its Restricted Subsidiaries in
connection with any Asset Sale or any Investment otherwise
permitted under the terms of the Indenture and
(2) to the extent that, after giving pro forma effect to the
acquisition thereof by NTL or any of its Restricted Subsidiaries,
Adjusted Total Controlled Assets is greater than 80% of Adjusted
Total Assets based on the most recent consolidated balance sheet
of NTL.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP after giving effect to the following:
(1) if, during or after such period, such Person or any of its
Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of
such Person and its Subsidiaries for such period shall be reduced
by an amount equal to the Pro Forma EBITDA, if positive, directly
attributable to the assets which are the subject of such Asset
Sale for the period or increased by an amount equal to the Pro
Forma EBITDA, if negative, directly attributable thereto for such
period and
(2) if, during or after such period, such Person or any of its
Subsidiaries completes an acquisition of any Person or business
which immediately after such acquisition is a Subsidiary of such
Person or whose assets are held directly by such Person or a
Subsidiary of such Person, Pro Forma EBITDA shall be computed so
as to give pro forma effect to the acquisition of such Person or
business, without giving effect to clause (3) of the definition
of Consolidated Net Income;
and provided further that, with respect to NTL, all of the foregoing references
to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted
Subsidiary" or "Restricted Subsidiaries" of NTL.
"Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that
will become a Wholly Owned Subsidiary after giving effect to the transaction
being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration,
(1) is a Cable Business or holds only Cable Assets,
(2) has no Indebtedness (other than Indebtedness being incurred to
consummate such transaction) and
(3) has no encumbrances or restrictions, other than such encumbrances
or restrictions imposed or permitted by the Indenture, the
indentures governing the Old Notes or any other instrument
governing unsecured indebtedness of NTL which is pari passu with
the notes, on its ability to pay dividends or make any other
distributions to NTL or any of its Subsidiaries.
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"Rating Agencies" means
(1) S&P,
(2) Moody's and
(3) if S&P or Moody's or both shall not make a rating of the notes
publicly available, a nationally recognized securities rating
agency or agencies, as the case may be, selected by NTL, which
shall be substituted for S&P or Moody's or both, as the case may
be.
"Rating Category" means
(1) with respect to S&P, any of the following categories: BB, B, CCC,
CC, C and D, or equivalent successor categories,
(2) with respect to Moody's, any of the following categories: Ba, B,
Caa, Ca, C and D, or equivalent successor categories, and
(3) the equivalent of any such category of S&P or Moody's used by
another Rating Agency.
In determining whether the rating of the notes has decreased by one or more
gradations, gradations within Rating Categories + and -- for S&P; 1, 2 and 3 for
Moody's; or the equivalent gradations for another Rating Agency shall be taken
into account e.g., with respect to S&P, a decline in a rating from BB to BB-, as
well as from BB- to B+, will constitute a decrease of one gradation.
"Rating Date" means that date which is 90 days prior to the earlier of
(1) a Change of Control and
(2) public notice of the occurrence of a Change of Control or of the
intention by NTL or any Permitted Holder to effect a Change of
Control.
"Ratings Decline" means the occurrence of any of the following events on,
or within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of NTL or any Person to effect a Change of
Control, which period shall be extended so long as the rating of any of NTL's
debt securities is under publicly announced consideration for possible downgrade
by any of the Rating Agencies:
(1) in the event that any of NTL's debt securities are rated by both
of the Rating Agencies on the Rating Date as Investment Grade,
the rating of such securities by either of the Rating Agencies
shall be below Investment Grade,
(2) in the event that any of NTL's debt securities are rated by
either, but not both, of the Rating Agencies on the Rating Date
as Investment Grade, the rating of such securities by both of the
Rating Agencies shall be below Investment Grade, or
(3) in the event any of NTL's debt securities are rated below
Investment Grade by both of the Rating Agencies on the Rating
Date, the rating of such securities by either Rating Agency shall
be decreased by one or more
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gradations, including gradations within Rating Categories as well
as between Rating Categories.
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate, expressed as a decimal number
between 1 and 0, then applicable to the issuer of such Disqualified Stock.
"Replacement Assets" means
(1) Cable Assets,
(2) Equity Interests of any Person engaged, directly or indirectly,
primarily in a Cable Business, which Person is or will become on
the date of acquisition thereof a Restricted Subsidiary as a
result of NTL's acquiring such Equity Interests,
(3) Permitted Non-Controlled Assets or
(4) any combination of the foregoing.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of NTL which is not a
Non-Restricted Subsidiary.
"Restricted Subsidiary Preferred Stock Dividend" means, for any dividend
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory federal
income tax rate, expressed as a decimal number between 1 and 0, then applicable
to the issuer of such preferred stock.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Subordinated Debentures" means the debentures exchangeable by NTL for the
Preferred Stock in accordance with the Certificate of Designation therefor.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by
(b) the number of years, calculated to the nearest one-twelfth, that
will elapse between such date and the making of such payment, by
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(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all
of the Capital Stock of which, except directors' qualifying shares, is at the
time owned directly or indirectly by NTL.
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REGISTRATION RIGHTS
The following is a summary of the registration rights provided in the
registration rights agreement and the notes. You should refer to the
registration rights agreement and the notes for a full description of the
registration rights that apply to the notes. The registration rights agreement
is held as an exhibit to the registration statement of which this prospectus
forms a part.
Under the registration rights agreement, we agreed to file with the SEC a
registration statement, including a prospectus, on the appropriate form under
the Securities Act with respect to an offer to exchange the old notes for new
notes registered under the Securities Act with terms substantially identical to
those of the old notes. If:
(1) on or prior to the time the exchange offer is completed existing SEC
interpretations are changed such that the debt securities received by
holders other than restricted holders in the exchange offer for
registrable securities are not or would not be, upon receipt,
transferable by each such holder without restriction under the
Securities Act,
(2) the exchange offer has not been completed by September 29, 2000 or
(3) the exchange offer is not available to any holder of the notes,
we will file with the SEC a shelf registration statement to cover resales of the
notes by the holders who satisfy specified conditions relating to the provision
of information in connection with the shelf registration statement. We will use
our best efforts to cause the applicable registration statement to be declared
effective as promptly as practicable by the SEC.
The registration rights agreement provides that:
(1) we will file an exchange registration statement with the SEC by May
23, 2000,
(2) we will use our best efforts to have the exchange registration
statement declared effective by August 21, 2000,
(3) unless the exchange offer would not be permitted by applicable law or
SEC policy, we will commence the exchange offer and use our best
efforts to issue on or before September 29, 2000, new notes in
exchange for all notes tendered before that date in the exchange
offer and
(4) if obligated to file the shelf registration statement, we will use
our best efforts to file the shelf registration statement with the
SEC as promptly as practicable after such filing obligation arises
and to cause the shelf registration to be declared effective by the
SEC within 90 days after the filing of such shelf registration
statement.
If, with respect to the notes:
(1) we fail to file the exchange registration statement or the shelf
registration statement on or before the date specified for such
filing,
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(2) the exchange registration statement is not declared effective by
August 21, 2000 or the shelf registration statement is not declared
effective within 90 days from the date such shelf registration
statement is filed,
(3) we fail to complete the exchange offer within the specified time
frame, or
(4) the exchange registration statement or the shelf registration
statement is filed and declared effective but is thereafter either
withdrawn or becomes subject to an effective stop order suspending
the effectiveness (except as specifically permitted in the
registration rights agreement) without being succeeded immediately by
an additional registration statement which becomes effective,
then we will pay special interest pursuant to provisions of the registration
rights agreement and the notes to each holder of the notes.
Special interest will accrue from:
(1) the date specified for such filing, in the case of clause (1) above,
(2) the date specified for effectiveness in the case of clause (2) above,
(3) the date specified for completion of the exchange offer, in the case
of clause (3) above or
(4) the date such exchange registration statement or shelf registration
statement ceases to be effective, in the case of clause (4) above
(each such period referred to in clauses (1)-(4) above an "Accrual
Period"),
at a rate per annum equal to 0.25% for the first 90 days of the Accrual Period;
0.50% for the second 90 days of the Accrual Period; 0.75% for the third 90 days
of the Accrual Period and 1.0% for the remaining portion of the Accrual Period
of the principal amount of the 2006 notes and 2009 notes or the Accreted Value
of the deferred coupon notes, as applicable, determined daily.
All accrued special interest will be paid by us on each interest payment
date to the applicable global note holder by wire transfer of immediately
available funds or by federal funds check and to holders of certificated
securities by wire transfer to the accounts specified by them in writing or by
mailing checks to their registered addresses if no such accounts have been
specified in writing. Following the cure of all registration defaults, the
accrual of special interest will cease.
Special interest on the notes, if any, will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Holders of notes will be required to make certain representations to us as
described in the registration rights agreement in order to participate in the
exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding special
interest pursuant to provisions of the notes, as set forth above.
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DESCRIPTION OF OTHER INDEBTEDNESS
Each of the following are summaries of NTL's or its subsidiaries' existing
debt instruments. You should refer to the relevant agreements for a full
description of the terms of those debt instruments. See "Where you can find more
information about us." Capitalized terms used and not defined below have the
meanings set forth in such debt instruments.
THE 12 3/4% NOTES
In April 1995, we issued $277,803,500 aggregate principal amount at
maturity of our 12 3/4% senior deferred coupon notes due 2005, the "old 12 3/4%
notes", at a discount to their aggregate principal amount to generate gross
proceeds to us of approximately $150.0 million. The old 12 3/4% notes were
issued and sold in a transaction exempt from the registration requirement of the
Securities Act pursuant to Rule 144A under the Securities Act or in transactions
complying with Regulation S under the Securities Act. On August 18, 1995 we
issued $277,803,500 aggregate principal amount at maturity of the 12 3/4% series
A senior deferred coupon notes due 2005, the "12 3/4% notes", in exchange for
the old 12 3/4% notes pursuant to the indenture relating thereto, the "12 3/4%
notes indenture". The terms of the 12 3/4% notes are identical in all material
respects to the old 12 3/4% notes except for certain transfer restrictions and
registration rights applicable to the old 12 3/4% notes. The old 12 3/4% notes
were cancelled on August 18, 1995 on consummation of the exchange offer which
was made pursuant to our prospectus dated July 18, 1995, forming part of the
registration statement on Form S-4 (File No. 33-92794) filed with the Commission
on May 26, 1995.
The 12 3/4% notes accrete at a rate of 12 3/4% computed on a semiannual
bond equivalent basis to an aggregate principal amount at maturity of
$277,803,500. Cash interest on the 12 3/4% notes does not accrue until prior to
April 15, 2000. Thereafter, the 12 3/4% notes accrue interest in cash at the
rate of 12 3/4% per annum on the principal amount payable semiannually on April
15 and October 15 of each year, commencing October 15, 2000 to holders of record
on the immediately preceding April 1, and October 1. The 12 3/4% notes mature on
April 15, 2005. The 12 3/4% notes are redeemable, at our option at any time, in
whole or in part, on or after April 15, 2000 at the redemption prices set forth
in the 12 3/4% notes indenture, plus any unpaid interest, if any, to the date of
redemption. The 12 3/4% notes may also be redeemed at our option in whole but
not in part in some circumstances where additional amounts, as defined in the
12 3/4% notes indenture, are payable under the 12 3/4% notes. In those
circumstances the 12 3/4% notes to be repurchased must be repurchased at 100% of
Accreted Value, or, as the case may be, principal amount thereof. Upon a Change
of Control Triggering Event, as defined in the 12 3/4% notes indenture, holders
of the 12 3/4% notes have the right to require us to repurchase all or any part
of the 12 3/4% notes at a repurchase price equal to 101% of the accreted value
thereof plus accrued and unpaid interest, if any. Subject to various conditions,
we are obligated to offer to purchase the 12 3/4% notes and other Qualified
Senior Notes, as defined in the 12 3/4% notes indenture, with the Excess
Proceeds of some Asset Sales at a redemption price of 100% of the Accreted Value
or, as the case may be, principal amount thereof plus accrued and unpaid
interest. The 12 3/4% notes indenture
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contains restrictions with respect to, among other things, the payment of
dividends, the repurchase of stock and the making of certain other Restricted
Payments, the incurrence of additional Indebtedness, the creation of certain
Liens, certain Asset Sales, transactions with Subsidiaries and other Affiliates
and mergers and consolidations.
The 12 3/4% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all of our other existing and
future senior unsecured obligations and rank senior to all of our other existing
and future subordinated debt.
In January 1996, we obtained the necessary consents of the registered
holders of the 12 3/4% notes to certain proposed amendments to the 12 3/4% notes
indenture. On January 22, 1996, NTL and Chemical Bank, now known as The Chase
Manhattan Bank, as trustee, executed a first supplemental indenture to effect
those amendments. In general, the amendments modified the 12 3/4% notes
indenture by amending the covenant entitled "Limitations on Dividend and Other
Payment Restrictions Affecting Subsidiaries" and other provisions to facilitate
the arrangement of our then proposed credit facilities and other financings and
make certain conforming and other changes to the 12 3/4% notes indenture.
In October 1998, we received the necessary consents of registered holders
of the 12 3/4% notes to amend the 12 3/4% notes indenture so as to allow us to
take certain actions that were previously prohibited under the 12 3/4% notes
indenture, particularly regarding the financing of our business and pending and
future acquisitions, including our acquisition of NTL Bermuda. In addition, the
amendment eliminated some, but not all, of certain differences between the
covenants in the 12 3/4% notes indenture and the existing 10 3/4% notes, 9 3/4%
notes and 9 1/2% notes indentures. On October 14, 1998, we and The Chase
Manhattan Bank, as trustee, executed a second supplemental indenture to effect
such amendment.
THE 11 1/2% DEFERRED COUPON NOTES
In January 1996, we issued $1,050.0 million aggregate principal amount at
maturity of 11 1/2% series A senior deferred coupon notes due 2006, the "old
11 1/2% deferred coupon notes", at a discount to their aggregate principal
amount to generate gross proceeds to us of approximately $600,127,500. The old
11 1/2% deferred coupon notes were issued and sold in a transaction exempt from
the registration requirement of the Securities Act pursuant to Rule 144A under
the Securities Act. On May 23, 1996, we issued $1,050.0 million aggregate
principal amount at maturity of the 11 1/2% series B senior deferred coupon
notes due 2006, the "11 1/2% deferred coupon notes", in exchange for the old
11 1/2% deferred coupon notes pursuant to the indenture relating thereto, the
"11 1/2% deferred coupon notes indenture". The terms of the 11 1/2% deferred
coupon notes are identical in all material respects to the old 11 1/2% deferred
coupon notes except for certain transfer restrictions and registration rights
applicable to the old 11 1/2% deferred coupon notes. The old 11 1/2% deferred
coupon notes tendered for exchange were cancelled on May 23, 1996 on
consummation of the exchange offer made pursuant to our prospectus dated April
22, 1996, forming part of our registration statement on Form S-4 (File No.
333-1010) filed with the Commission on April 16, 1996.
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The 11 1/2% deferred coupon notes accrete at a rate of 11 1/2% computed on
a semiannual bond equivalent basis to an aggregate principal amount at maturity
of $1,050.0 million. Cash interest on the 11 1/2% deferred coupon notes does not
accrue until February 1, 2001. Thereafter, the 11 1/2% deferred coupon notes
accrue interest in cash at the rate of 11 1/2% per annum on the principal amount
payable semiannually on February 1 and August 1 of each year, commencing August
1, 2001, to holders of record on the immediately preceding January 15, and July
15. The 11 1/2% deferred coupon notes mature on February 1, 2006. The 11 1/2%
deferred coupon notes are redeemable, at our option at any time, in whole or in
part, on or after February 1, 2001 at the redemption prices set forth in the
11 1/2% deferred coupon notes indenture plus any accrued unpaid interest to the
date of redemption. The 11 1/2% deferred coupon notes may also be redeemed at
our option in whole but not in part in some circumstances where "Additional
Amounts", as defined in the 11 1/2% deferred coupon notes indenture, are payable
under the 11 1/2% notes. In those circumstances, the 11 1/2% deferred coupon
notes to be repurchased must be repurchased at 100% of accreted value or, as the
case may be, principal amount thereof plus accrued and unpaid interest. Upon a
Change of Control Triggering Event, as defined in the 11 1/2% deferred coupon
notes indenture, holders of the 11 1/2% deferred coupon notes have the right to
require us to repurchase all or any part of the 11 1/2% deferred coupon notes at
a repurchase price equal to 101% of the accreted value or, as the case may be,
principal amount thereof plus accrued and unpaid interest, if any. Subject to
various conditions, we are obligated to offer to purchase the 11 1/2% deferred
coupon notes and other Qualified Senior Notes, as defined in the 11 1/2%
deferred coupon notes indenture, with the Excess Proceeds of certain Asset Sales
at a redemption price of 100% of the accreted value or, as the case may be,
principal amount thereof plus accrued and unpaid interest, if any. The 11 1/2%
deferred coupon notes indenture contains restrictions with respect to, among
other things, the payment of dividends, the repurchase of stock and the making
of some other Restricted Payments, the incurrence of additional Indebtedness,
the creation of some Liens, some sales of assets, transactions with Subsidiaries
and other Affiliates and mergers and consolidations.
In October 1998, we received the necessary consents of registered holders
of the 11 1/2% deferred coupon notes to amend the 11 1/2% deferred coupon notes
indenture so as to allow us to take certain actions that were previously
prohibited under the 11 1/2% deferred coupon notes indenture, particularly
regarding the financing of our business and pending and future acquisitions,
including our acquisition of NTL Bermuda. In addition, the amendment eliminated
some, but not all, of certain differences between the covenants in the 11 1/2%
deferred coupon notes indenture and the existing 10 3/4% notes, 9 3/4% notes and
9 1/2% notes indentures. On October 14, 1998, NTL and The Chase Manhattan Bank,
as trustee, executed a first supplemental indenture to effect such amendment.
The 11 1/2% deferred coupon notes are our senior unsecured obligations of
ranking equal in right of payment of principal and interest with all of our
other existing and future senior unsecured obligations and rank senior to all of
our other existing and future subordinated debt.
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THE 10% NOTES
In February 1997, we issued $400.0 million aggregate principal amount of
our 10% series A senior notes due 2007, the "old 10% notes". The old 10% notes
were issued and sold in a transaction exempt from the registration requirement
of the Securities Act pursuant to Rule 144A under the Securities Act. On June
27, 1997 we issued $400.0 million aggregate principal amount at maturity of its
10% series B senior notes due 2007, the "10% notes", in exchange for the old 10%
notes pursuant to the indenture relating thereto, the "10% notes indenture". The
terms of the 10% notes are identical in all material respects to the old 10%
notes except for certain transfer restrictions and registration rights
applicable to the old 10% notes. The old 10% notes tendered for exchange were
cancelled on June 27, 1997 on consummation of the exchange offer made pursuant
to our prospectus dated May 27, 1997, forming part of our registration statement
on Form S-4 (File No. 333-25577) filed with the Commission on April 21, 1997.
The 10% notes accrue interest in cash at the rate of 10% per annum on the
principal amount payable semiannually on February 15 and August 15 of each year,
to holders of record on the immediately preceding February 1, and August 1. The
10% notes mature on February 15, 2007. The 10% notes are redeemable, at our
option at any time, in whole or in part, on or after February 15, 2002 at
redemption prices set forth in the 10% notes indenture, plus any accrued unpaid
interest to the date of redemption. The 10% notes may also be redeemed at our
option in whole but not in part in some circumstances where "Additional
Amounts", as defined in the 10% notes indenture, are payable under the 10%
notes. In those circumstances, the 10% notes to be repurchased must be
repurchased at 100% of the principal amount thereof plus accrued and unpaid
interest. Upon a Change of Control Triggering Event, as defined in the 10% notes
indenture, holders of the 10% notes have the right to require us to repurchase
all or any part of the 10% notes at a repurchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any. Subject to
various conditions, we are obligated to offer to purchase the 10% notes and
other Qualified Senior Notes, as defined in the 10% notes indenture, with the
Excess Proceeds of some Asset Sales at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any. The 10% notes
indenture contains restrictions with respect to, among other things, the payment
of dividends, the repurchase of stock and the making of some other Restricted
Payments, the incurrence of additional Indebtedness, the creation of some Liens,
some sales of assets, transactions with Subsidiaries and other Affiliates and
mergers and consolidations.
In October 1998, we received the necessary consents of registered holders
of the 10% notes to amend the 10% notes indenture so as to allow us to take
certain actions that were previously prohibited under the 10% notes indenture,
particularly regarding the financing of our business and pending and future
acquisitions, including our acquisition of Partners. In addition, the amendment
eliminated some, but not all, differences between the covenants in the 10% notes
indenture and the existing 10 3/4% notes, the 9 3/4% notes and the 9 1/2% notes
indentures. On October 14, 1998, NTL and The Chase Manhattan Bank, as trustee,
executed a first supplemental indenture to effect such amendment.
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The 10% notes are our senior unsecured obligations ranking equal in right
of payment of principal and interest with all of our other existing and future
senior unsecured obligations and rank senior to all of our other existing and
future subordinated debt.
THE 9 1/2% NOTES
In March 1998 we issued L125.0 million ($207,437,500) aggregate principal
amount of our 9 1/2% senior notes due 2008, the "old 9 1/2% notes". The old
9 1/2% notes were issued and sold in a transaction exempt from the registration
requirement of the Securities Act pursuant to Rule 144A under the Securities
Act. On December 24, 1998 we closed an exchange offer exchanging L123,686,000
principal amount of the 9 1/2% series B senior notes due 2008, the "new 9 1/2%
notes" and, together with the old 9 1/2% notes, the "9 1/2% notes", registered
under the Securities Act for a like principal amount of the old 9 1/2% notes.
The terms of the new 9 1/2% notes are identical in all material respects to the
old 9 1/2% notes except for some transfer restrictions and registration rights
applicable to the old 9 1/2% notes.
The 9 1/2% notes accrue interest in cash at the rate of 9 1/2% per annum on
the principal amount payable semiannually on April 1, and October 1 of each
year, to holders of record on the immediately preceding March 15 and September
15. The 9 1/2% notes mature on April 1, 2008. The 9 1/2% notes are redeemable at
our option at any time, in whole or in part, on or after April 1, 2003 at
redemption prices set forth in the 9 1/2% notes indenture, plus any accrued
unpaid interest to the date of redemption. The 9 1/2% notes may also be redeemed
at our option in whole but not in part in some circumstances where "Additional
Amounts", as defined in the 9 1/2% notes indenture, are payable under the 9 1/2%
notes. In those circumstances, the 9 1/2% notes to be repurchased must be
repurchased at 100% of the principal amount thereof plus accrued and unpaid
interest. Upon a Change of Control Triggering Event, as defined in the 9 1/2%
notes indenture, holders of the 9 1/2% notes have the right to require us to
repurchase all or any part of the 10% notes at a repurchase price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any.
Subject to various conditions, we are obligated to offer to purchase the 9 1/2%
notes and other Qualified Senior Notes, as defined in the 9 1/2% notes
indenture, with the Excess Proceeds of certain Asset Sales at a redemption price
of 100% of the principal amount thereof plus accrued and unpaid interest, if
any. The 9 1/2% notes indenture contains restrictions with respect to, among
other things, the payment of dividends, the repurchase of stock and the making
of some other Restricted Payments, the incurrence of additional Indebtedness,
the creation of some Liens, some sales of assets, transactions with Subsidiaries
and other Affiliates and mergers and consolidations.
The 9 1/2% notes are senior unsecured obligations of NTL ranking equal in
right of payment of principal and interest with all of its other existing and
future senior unsecured obligations and rank senior to all of its other existing
and future subordinated debt.
THE 10 3/4% NOTES
In March 1998, we issued L300.0 million ($497,850,000) aggregate principal
amount of maturity of our 10 3/4% senior deferred coupon notes due 2008, the
"old 10 3/4% notes", at a discount to their aggregate principal amount to
generate gross proceeds to us of
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approximately L124,587,000. The old 10 3/4% notes were issued and sold in a
transaction exempt from the registration requirement of the Securities Act
pursuant to Rule 144A under the Securities Act. On December 24, 1998 we closed
an exchange offer exchanging L300.0 million principal amount at maturity of the
10 3/4% series B senior deferred coupon notes due 2008, the "new 10 3/4% notes"
and, together with the old 10 3/4% notes, the "10 3/4% notes", registered under
the Securities Act for a like principal amount at maturity of the old 10 3/4%
notes. The terms of the new 10 3/4% notes are identical in all material respects
to the old 10 3/4% notes except for some transfer restrictions and registration
rights applicable to the old 10 3/4% notes.
The 10 3/4% notes accrete at a rate of 10 3/4% computed on a semiannual
bond equivalent basis to an aggregate principal amount at maturity of L300.0
million ($497,850,000). Cash interest on the 10 3/4% notes does not accrue until
April 1, 2003. Thereafter, the 10 3/4% notes accrue interest in cash at the rate
of 10 3/4% per annum on the principal amount payable semiannually on April 1 and
October 1 of each year, commencing April 1, 2003, to holders of record on the
immediately preceding March 15, and September 15. The 10 3/4% notes mature on
April 1, 2008. The 10 3/4% notes are redeemable, at our option at any time, in
whole or in part, on or after April 1, 2003 at the redemption prices set forth
in the 10 3/4% notes indenture plus any accrued unpaid interest to the date of
redemption. The 10 3/4% notes may also be redeemed at our option in whole but
not in some circumstances where "Additional Amounts", as defined in the 10 3/4%
notes indenture, are payable under the 10 3/4% notes. In those circumstances,
the 10 3/4% notes to be repurchased must be repurchased at 100% of accreted
value or, as the case may be, principal amount thereof plus accrued and unpaid
interest. Upon a Change of Control Triggering Event, as defined in the 10 3/4%
notes indenture, holders of the 10 3/4% notes have the right to require us to
repurchase all or any part of the 10 3/4% notes at a repurchase price equal to
101% of the accreted value or, as the case may be, principal amount thereof plus
accrued and unpaid interest, if any. Subject to various conditions, we are
obligated to offer to purchase the 10 3/4% notes and other Qualified Senior
Notes, as defined in the 10 3/4% notes indenture, with the Excess Proceeds of
some Asset Sales at a redemption price of 100% of the accreted value or, as the
case may be, principal amount thereof plus accrued and unpaid interest, if any.
The 10 3/4% notes indenture contains restrictions with respect to, among other
things, the payment of dividends, the repurchase of stock and the making of some
other Restricted Payments, the incurrence of additional Indebtedness, the
creation of some Liens, some sales of assets, transactions with Subsidiaries and
other Affiliates and mergers and consolidations.
The 10 3/4% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all of our other existing and
future senior unsecured obligations and rank senior to all of our other existing
and future subordinated debt.
THE 9 3/4% NOTES
In March 1998, we issued $1.3 billion aggregate principal amount at
maturity of our 9 3/4% senior deferred coupon notes due 2008, the "old 9 3/4%
notes", at a discount to their aggregate principal amount to generate gross
proceeds to us of approximately $802,412,000. The old 9 3/4% notes were issued
and sold in a transaction exempt from the
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registration requirement of the Securities Act pursuant to Rule 144A under the
Securities Act. On December 24, 1998 we closed an exchange offer exchanging
$1,248,970,000 principal amount at maturity of the 9 3/4% series B senior
deferred coupon notes due 2006, the "new 9 3/4% notes" and, together with the
old 9 3/4% notes, the "9 3/4% notes," registered under the securities act for a
like principal amount at maturity of the old 9 3/4% notes. The terms of the new
9 3/4% notes are identical in all material respects to the old 9 3/4% notes
except for some transfer restrictions and registration rights applicable to the
old 9 3/4% notes.
The 9 3/4% notes accrete at a rate of 9 3/4% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of $1.3 billion.
Cash interest on the 9 3/4% notes does not accrue until April 1, 2003.
Thereafter, the 9 3/4% notes accrue interest in cash at the rate of 9 3/4% per
annum on the principal amount payable semiannually on April 1 and October 1 of
each year, commencing April 1, 2003, to holders of record on the immediately
preceding March 15, and September 15. The 9 3/4% notes mature on April 1, 2008.
The 9 3/4% notes are redeemable, at our option at any time, in whole or in part,
on or after April 1, 2003 at the redemption prices set forth in the 9 3/4% notes
indenture plus any accrued unpaid interest to the date of redemption. The 9 3/4%
notes may also be redeemed at our option in whole but not in part in certain
circumstances where "Additional Amounts", as defined in the 9 3/4% notes
indenture, are payable under the 9 3/4% notes. In those circumstances, the
9 3/4% notes to be repurchased must be repurchased at 100% of the accreted value
or, as the case may be, principal amount thereof plus accrued and unpaid
interest. Upon a Change of Control Triggering Event, as defined in the 9 3/4%
notes indenture, holders of the 9 3/4% notes have the right to require us to
repurchase all or any part of the 9 3/4% notes at a repurchase price equal to
101% of the accreted value or, as the case may be, principal amount thereof plus
accrued and unpaid interest, if any. Subject to various conditions, we are
obligated to offer to purchase the 9 3/4% notes and other Qualified Senior
Notes, as defined in the 9 3/4% notes indenture, with the Excess Proceeds of
some Asset Sales at a redemption price of 100% of the accreted value or, as the
case may be, principal amount thereof plus accrued and unpaid interest, if any.
The 9 3/4% notes indenture contains restrictions with respect to, among other
things, the payment of dividends, the repurchase of stock and the making of some
other Restricted Payments, the incurrence of additional Indebtedness, the
creation of some Liens, some sales of assets, transactions with Subsidiaries and
other Affiliates and mergers and consolidations.
The 9 3/4% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all of our other existing and
future senior unsecured obligations and rank senior to all of our other existing
and future subordinated debt.
THE 1999 9 3/4% NOTES
On April 7, 1999, we issued L330.0 million ($547,635,000) aggregate
principal amount at maturity of our 9 3/4% senior deferred coupon notes due
2009, the "1999 9 3/4% notes". The 1999 9 3/4% notes were offered and sold in
transactions exempt from the registration requirements of the Securities Act
pursuant to Rule 144A under 144A under the Securities Act and Regulation S under
the Securities Act. On September 3, 1999, we closed an exchange offer exchanging
L327,826,000 aggregate principal amount at maturity
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of 1999 9 3/4% notes for a like principal amount of 1999 9 3/4% Series B senior
deferred coupon note, due 2008, the "1999 9 3/4% new notes" and, together with
the 1999 9 3/4% old notes, the "1999 9 3/4% notes." The terms of the 1999 9 3/4%
new notes are identical to the 1999 9 3/4% old notes except for certain transfer
restrictions and registration rights applicable to the 1999 9 3/4% old notes.
The 1999 9 3/4% notes accrete at a rate of 9 3/4% computed on a semiannual
bond equivalent basis to an aggregate principal amount at maturity of L330.0
million. Cash interest on the 1999 9 3/4% notes does not accrue until April 15,
2004. Thereafter, the 1999 9 3/4% notes accrue interest in cash at the rate of
9 3/4% per annum on the principal amount payable semiannually on April 15 and
October 15 of each year, commencing October 15, 2004, to holders of record on
the immediately preceding April 1 and October 1. The 1999 9 3/4% notes mature on
April 15, 2009. The 9 3/4% notes are redeemable, at our option at any time, in
whole or in part, on or after April 15, 2004 at the redemption prices set forth
in the 1999 9 3/4% notes indenture plus any accrued unpaid interest to the date
of redemption. The 1999 9 3/4% notes may also be redeemed at our option in whole
but not in part in some circumstances where "Additional Amounts", as defined in
the 1999 9 3/4% notes indenture, are payable under the 1999 9 3/4% notes. In
those circumstances, the 1999 9 3/4% notes to be repurchased must be repurchased
at 100% of accreted value or, as the case may be, principal amount thereof plus
accrued and unpaid interest. Upon a Change of Control Triggering Event, as
defined in the 1999 9 3/4% notes indenture, holders of the 1999 9 3/4% notes
have the right to require us to repurchase all or any part of the 1999 9 3/4%
notes at a repurchase price equal to 101% of the accreted value or, as the case
may be, principal amount thereof plus accrued and unpaid interest, if any.
Subject to various conditions, we are obligated to offer to purchase the 1999
9 3/4% notes and Other Qualified Notes, as defined in the 1999 9 3/4% notes
indenture, with the Excess Proceeds of some Asset Sales at a redemption price of
100% of the accreted value or, as the case may be, principal amount thereof plus
accrued and unpaid interest, if any. The 1999 9 3/4% notes indenture contains
restrictions with respect to, among other things, the payment of dividends, the
repurchase of stock and the making of some other Restricted Payments, the
incurrence of additional Indebtedness, the creation of some Liens, some sales of
assets, transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 1999 9 3/4% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all of its other existing and
future senior unsecured obligations and rank senior to all of its other existing
and future subordinated debt, including, without limitation, the convertible
notes and the existing convertible notes.
THE 11 1/2% NOTES
On November 2, 1998, we issued $625.0 million aggregate principal amount of
our 11 1/2% senior notes due 2008, the "11 1/2% old notes". The 11 1/2% old
notes were offered and sold in transactions exempt from the registration
requirement of the Securities Act pursuant to Rule 144A under the Securities Act
and Regulation S under the Securities Act. On June 10, 1999, we closed an
exchange offer exchanging $625.0 million aggregate principal amount of 11 1/2%
old notes for a like principal amount of 11 1/2% series B senior notes due 2008,
the "11 1/2% new notes" and, together with the 11 1/2% old notes, the
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"11 1/2% notes." The terms of the 11 1/2% new notes are identical in all
material respects to the 11 1/2% old notes except for certain transfer
restrictions and registration rights applicable to the 11 1/2% old notes.
The 11 1/2% notes accrue interest in cash at the rate of 11 1/2% per annum
on the principal amount payable semiannually on April 1, and October 1 of each
year, to holders of record on the immediately preceding March 15 and September
15. The 11 1/2% notes mature on October 1, 2008. The 11 1/2% notes are
redeemable at our option at any time, in whole or in part, on or after October
1, 2003 at redemption prices set forth in the 11 1/2% notes indenture, plus any
accrued unpaid interest to the date of redemption. The 11 1/2% notes may also be
redeemed at our option in whole but not in part in some circumstances where
"Additional Amounts", as defined in the 11 1/2% notes indenture, are payable
under the 11 1/2% notes. In those circumstances, the 11 1/2% notes to be
repurchased must be repurchased at 100% of the principal amount thereof plus
accrued and unpaid interest. Upon a Change of Control Triggering Event, as
defined in the 11 1/2% notes indenture, holders of the 11 1/2% notes have the
right to require us to repurchase all or any part of the 11 1/2% notes at a
repurchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any. Subject to various conditions, we are obligated to
offer to purchase the 11 1/2% notes and other Qualified Senior Notes, as defined
in the 11 1/2% notes indenture, with the Excess Proceeds of some Asset Sales at
a redemption price of 100% of the principal amount thereof plus accrued and
unpaid interest, if any. The 11 1/2% notes indenture contains restrictions with
respect to, among other things, the payment of dividends, the repurchase of
stock and the making of some other Restricted Payments, the incurrence of
additional Indebtedness, the creation of some Liens, some sales of assets,
transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 11 1/2% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all our other existing and
future senior unsecured obligations and rank senior to all of our other existing
and future subordinated debt.
THE 12 3/8% NOTES
On November 6, 1998, we issued $450.0 million aggregate principal amount at
maturity of our 12 3/8% senior deferred coupon notes due 2008, the "12 3/8% old
notes". The 12 3/8% old notes were offered and sold in transactions exempt from
the registration requirements of the Securities Act pursuant to Rule 144A under
144A under the Securities Act and Regulation S under the Securities Act. On June
10, 1999, we closed an exchange offer exchanging $450.0 million aggregate
principal amount at maturity of 12 3/8% old notes for a like principal amount of
12 3/8% series B senior deferred coupon notes due 2008, the "12 3/8% new notes"
and, together with the 12 3/8% old notes, the "12 3/8% notes." The terms of the
12 3/8% new notes are identical in all material respects to the 12 3/8% old
notes except for certain transfer restrictions and registration rights
applicable to the 12 3/8% old notes.
The 12 3/8% notes accrete at a rate of 12 3/8% computed on a semiannual
bond equivalent basis to an aggregate principal amount at maturity of $450.0
million. Cash interest on the 12 3/8% notes does not accrue until April 1, 2003.
Thereafter, the 12 3/8% notes accrue interest in cash at the rate of 12 3/8% per
annum on the principal amount payable semiannually on April 1 and October 1 of
each year, commencing October 1,
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2003, to holders of record on the immediately preceding March 15, and September
15. The 12 3/8% notes mature on October 1, 2008. The 12 3/8% notes are
redeemable, at our option at any time, in whole or in part, on or after October
1, 2003 at the redemption prices set forth in the 12 3/8% notes indenture plus
any accrued unpaid interest to the date of redemption. The 12 3/8% notes may
also be redeemed at our option in whole but not in part in some circumstances
where "Additional Amounts", as defined in the 12 3/4% notes indenture, are
payable under the 12 3/8% notes. In those circumstances, the 12 3/8% notes to be
repurchased must be repurchased at 100% of accreted value or, as the case may
be, principal amount thereof plus accrued and unpaid interest. Upon a Change of
Control Triggering Event, as defined in the 12 3/8% notes indenture, holders of
the 12 3/8% notes have the right to require us to repurchase all or any part of
the 12 3/8% notes at a repurchase price equal to 101% of the accreted value or,
as the case may be, principal amount thereof plus accrued and unpaid interest,
if any. Subject to various conditions, we are obligated to offer to purchase the
12 3/8% notes and other Qualified Senior Notes, as defined in the 12 3/8% notes
indenture, with the Excess Proceeds of some Asset Sales at a redemption price of
100% of the accreted value or, as the case may be, principal amount thereof plus
accrued and unpaid interest, if any. The 12 3/8% notes indenture contains
restrictions with respect to, among other things, the payment of dividends, the
repurchase of stock and the making of some other Restricted Payments, the
incurrence of additional Indebtedness, the creation of some Liens, some sales of
assets, transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 12 3/8% notes are our senior unsecured obligations ranking equal in
right of payment of principal and interest with all of our other existing and
future senior unsecured obligations and rank senior to all of our other existing
and future subordinated debt.
THE 7% CONVERTIBLE NOTES
In December 1998, we issued and sold an aggregate principal amount of
$600.0 million of our 7% convertible subordinated notes due 2008, in
transactions exempt from, or not subject to, the registration requirements of
the Securities Act. Cash interest on the existing convertible notes is payable
semiannually on June 15 and December 15 of each year, commencing December 15,
1999. These convertible notes mature on December 15, 2008. These convertible
notes are convertible at the option of the holder thereof at any time prior to
maturity, unless previously redeemed, into shares of common stock of NTL
Incorporated, at a conversion price of $61.25 per share subject to further
adjustment in some events. These convertible notes are redeemable, in whole or
in part, at our option, at any time on or after December 15, 2001, at the
redemption prices set forth in the indenture pursuant to which the convertible
notes were issued. Upon a Change of Control Triggering Event, as defined in the
indenture relating to those convertible notes, holders of the convertible notes
have the right to require us to purchase all or any part of the convertible
notes at a purchase price equal to 101% of the principal amount thereof and any
accrued and unpaid interest to the date of purchase. The indenture relating to
those convertible notes contains restrictions with respect to, among other
things, some Asset Sales, payment of Additional Amounts and mergers and
consolidations.
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These convertible notes are unsecured obligations of NTL subordinated in
right of payment to all of our existing and future senior debt, as defined in
the indenture relating to those convertible notes, including, without
limitation, the notes.
On June 7, 1999, the Commission declared effective NTL's and NTL
Incorporated's shelf registration statement relating to the resale of these
convertible notes and the common stock issuable upon conversion thereof by the
holders thereof.
VARIABLE RATE REDEEMABLE GUARANTEED LOAN NOTES
In July 1999, we issued 80.0 million Irish punts ($104.0 million) principal
amount of Variable Rate Redeemable Guaranteed Loan Notes due January 5, 2002 in
connection with the acquisition of Cablelink. Interest is payable quarterly on
the notes, commencing July 9, 1999 at EURIBOR. The interest rate at September
30, 1999 was 2.698%. The notes are redeemable at any time, at the option of the
holder, at par plus accrued and unpaid interest to the date of redemption.
NTL TRIANGLE 11.20% DISCOUNT DEBENTURES DUE 2007
On November 15, 1995, NTL Triangle issued $517,321,000 aggregate principal
amount at maturity of its 11.20% senior discount debentures due 2007, the "NTL
Triangle 11.20% debentures", at a discount to their aggregate principal amount
to generate gross proceeds to NTL Triangle of approximately $299,999,621. The
NTL Bermuda 11.20% debentures were registered with the Commission on NTL
Triangle's registration statement on Form S-1 (File No. 33-96932).
The NTL Triangle 11.20% debentures accrete at the rate of 11.20% per annum,
compounded semiannually to an aggregate principal amount at maturity of
$517,321,000. Cash interest on the NTL Triangle 11.20% debentures does not
accrue until November 15, 2000. Thereafter, the NTL Triangle 11.20% debentures
accrue interest at the rate of 11.20% per annum on the principal amount payable
semiannually on May 15 and November 15 of each year, commencing May 15, 2001.
The NTL Triangle 11.20% debentures mature on November 15, 2007. The NTL Triangle
11.20% debentures are redeemable, at the option of NTL Triangle at any time, in
whole or in part, on or after November 15, 2000 at the redemption prices set
forth in the NTL Triangle 11.20% debentures indenture plus accrued and unpaid
interest to the date of redemption. The NTL Triangle 11.20% debentures may also
be redeemed by NTL Triangle in whole but not in part in certain circumstances
where "Additional Amounts", as defined in the NTL Triangle 11.20% debentures
indenture, are payable on the NTL Triangle 11.20% debentures after November 15,
2001. In such circumstances, the NTL Triangle 11.20% debentures may be redeemed
at 100% of their principal amount plus accrued and unpaid interest to the date
of redemption. Upon a Change of Control Triggering Event, as defined in the NTL
Triangle 11.20% debentures indenture, holders of the Partners 11.20% debentures
have the right to require NTL Triangle to repurchase all or any part of the NTL
Triangle 11.20% debentures at a repurchase price equal to 101% of the accreted
value or, as the case may be, principal amount thereof plus accrued and unpaid
interest, if any. Subject to various conditions, NTL Triangle is obligated to
offer to purchase the NTL Triangle 11.20% debentures with the Excess Proceeds of
some Asset Sales at a redemption price of 100% of the accreted value
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or, as the case may be, principal amount thereof plus accrued and unpaid
interest, if any. The NTL Triangle 11.20% debentures indenture contains
restrictions with respect to, among other things, the payment of dividends, the
repurchase of stock and the making of some other Restricted Payments, the
incurrence of additional Indebtedness, the creation of some Liens, some sales of
assets, transactions with Affiliates and mergers and consolidations.
The NTL Triangle 11.20% debentures are senior unsecured obligations of NTL
Triangle ranking equal in right of payment of principal and interest with all
other existing and future senior unsecured obligations of NTL Triangle.
THE DIAMOND 13 1/4% NOTES
In September 1994, Diamond issued its 13 1/4% senior discount notes due
September 30, 2004 (the "Diamond 13 1/4% notes"). Interest on the Diamond
13 1/4% notes will be payable on March 31 and September 30 of each year,
commencing March 31, 2000, at a rate of 13 1/4% per annum.
The Diamond 13 1/4% Notes are redeemable, in whole or in part, at the
option of Diamond at any time on or after September 30, 1999. The Diamond
13 1/4% Notes are also redeemable in whole, but not in part, at the option of
Diamond at any time at 100% of the principal amount thereof plus accrued
interest to the date of redemption (or, prior to September 30, 1999, at 100% of
Accreted Value, as defined in the indenture governing the Diamond 13 1/4% notes)
in the event of certain tax law changes requiring the payment of additional
amounts. Diamond is required to offer to repurchase all outstanding Diamond
13 1/4% notes at 101% of the principal amount thereof plus accrued interest to
the date of repurchase (or, prior to September 30, 1999, at 101% of Accreted
Value on the date of repurchase) after the occurrence of a Change of Control, as
defined in the indenture governing the Diamond 13 1/4% notes. In addition, upon
the occurrence of an Asset Disposition, as defined in the indenture governing
the Diamond 13 1/4% notes, Diamond may be obligated to make an offer to purchase
all or a portion of the outstanding Diamond 13 1/4% notes at 100% of the
principal amount thereof plus accrued interest to the date of repurchase (or,
prior to December 15, 2000, at 100% of Accreted Value on the date of
repurchase).
THE DIAMOND 11 3/4% NOTES
In December 1995, Diamond issued its 11 3/4% senior discount notes due
December 15, 2005 (the "11 3/4% Diamond notes"). Interest on the Diamond 11 3/4%
notes will be payable on June 15 and December 15 of each year, commencing June
15, 2001, at a rate of 11 3/4% per annum.
The Diamond 11 3/4% notes are redeemable, in whole or in part, at the
option of Diamond at any time on or after December 15, 2000. The Diamond 11 3/4%
notes are also redeemable in whole, but not in part, at the option of Diamond at
any time at 100% of the principal amount thereof plus accrued interest to the
date of redemption (or, prior to December 15, 2000, at 100% of the Accreted
Value thereof, as defined in the indenture governing the Diamond 11 3/4% notes)
in the event of certain tax law changes requiring the payment of additional
amounts. Diamond is required to offer to repurchase all outstanding
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Diamond 11 3/4% notes at 101% of principal amount thereof plus accrued interest
to the date of repurchase (or, prior to December 15, 2000, at 101% of Accreted
Value on the date of repurchase) after the occurrence of a Change of Control, as
defined in the indenture governing the Diamond 11 3/4% Notes. In addition, upon
the occurrence of an Asset Disposition, as defined in the indenture governing
the Diamond 11 3/4% notes, Diamond may be obligated to make an offer to purchase
all or a portion of the outstanding Diamond 11 3/4% notes at 100% of the
principal amount thereof plus accrued interest to the date of repurchase (or,
prior to December 15, 2000, at 100% of Accreted Value on the date of
repurchase).
THE DIAMOND 10 3/4% NOTES
In February 1997, Diamond issued its 10 3/4% Senior Discount Notes due
February 15, 2007 (the "Diamond 10 3/4% notes"). Interest on the Diamond 10 3/4%
notes will be payable on February 15 and August 15 of each year, commencing
August 15, 2002, at a rate of 10 3/4% per annum.
The Diamond 10 3/4% notes are redeemable, in whole or in part, at the
option of Diamond at any time on or after February 15, 2002. The Diamond 10 3/4%
notes are also redeemable in whole, but not in part, at the option of Diamond at
any time at 100% of the principal amount thereof plus accrued interest to the
date of redemption (or, prior to February 15, 2002, at 100% of Accreted Value,
as defined in the indenture governing the Diamond 10 3/4% notes) in the event of
certain tax law changes requiring the payment of additional amounts. Diamond is
required to offer to repurchase all outstanding Diamond 10 3/4% notes at 101% of
the principal amount thereof plus accrued interest to the date of repurchase
(or, prior to February 15, 2002, at 101% of Accreted Value on the date of
repurchase) after the occurrence of a Change of Control, as defined in the
indenture governing the Diamond 10 3/4% Notes. In addition, upon the occurrence
of an Asset Disposition, as defined in the indenture governing the Diamond
10 3/4% notes, Diamond may be obligated to make an offer to purchase all or a
portion of the outstanding Diamond 10 3/4% notes at 100% of the principal amount
thereof plus accrued interest to the date of repurchase (or, prior to February
15, 2002, at 100% of Accreted Value on the date of repurchase).
THE DIAMOND 10% NOTES
In February 1998 Diamond issued L135.0 million aggregate principal amount
at maturity of its 10% senior notes due February 1, 2008 (the "Diamond 10%
notes"). Interest on the Diamond 10% Notes is payable semi-annually in arrears
on August 1 and February 1 of each year at a rate of 10% per annum.
The Diamond 10% notes will be redeemable, in whole or in part, at the
option of Diamond at any time on or after February 1, 2003. The 10% notes are
also redeemable in whole, but not in part, at the option of Diamond at any time
at 100% of the principal amount thereof, plus accrued and unpaid interest and
any other amounts payable thereon to the date of redemption in the event of
certain tax law changes requiring the payment of additional amounts. Upon the
occurrence of a Change of Control, as defined in the indenture governing the
Diamond 10% notes, Diamond is required to offer to repurchase all
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outstanding 10% Notes at 101% of their principal amount plus accrued and unpaid
interest and any other amounts payable thereon to the date of repurchase.
THE DIAMOND 9 1/8% NOTES
In February 1998, Diamond issued $110.0 million aggregate principal amount
at maturity of its 9 1/8% senior notes due February 1, 2008 (the "Diamond 9 1/8%
notes"). Interest on the Diamond 9 1/8% Notes is payable semi-annually in
arrears on August 1 and February 1 of each year, commencing August 1, 1998 at a
rate of 9 1/8% per annum.
The Diamond 9 1/8% notes will be redeemable, in whole or in part, at the
option of Diamond at any time on or after February 1, 2003. The Diamond 9 1/8%
notes are also redeemable in whole, but not in part at the option of Diamond at
any time at 100% of the principal amount thereof, plus accrued and unpaid
interest and any other amounts payable thereon to the date of redemption in the
event of certain tax law changes requiring the payment of additional amounts.
Upon the occurrence of a Change of Control, as defined in the indenture
governing the 9 1/8% notes, Diamond is required to offer to repurchase all
outstanding 9 1/8% notes at 101% of their principal amount plus accrued and
unpaid interest and any other amounts payable thereon to the date of repurchase.
CWC CONSUMERCO ACQUISITION FINANCING COMMITMENT
Pursuant to the Bridge Commitment Letter entered into by Morgan Stanley
Bridge Fund L.L.C. ("MSBF"), NTL Incorporated and us on July 26, 1999, MSBF has
committed that either it and/or one or more of its respective affiliates will
purchase L2,376.0 million in aggregate principal amount of Senior Increasing
Rate Notes due 2001 (the "Bridge Notes"). The Bridge Notes will be senior
obligations of NTL Incorporated. MSBF has committed to make such purchase upon
the terms and subject to the conditions set forth in the note purchase agreement
to be entered into by and between Morgan Stanley Senior Funding, Inc. and NTL
Incorporated.
It is not currently contemplated that we will be the borrower under the
Bridge Notes.
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FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of material anticipated U.S. federal
income tax consequences of the exchange of old notes for the new notes and the
ownership of the new notes. This summary deals only with notes held as capital
assets by initial holders old notes who purchased those notes at the offering
price, and does not deal with special situations, such as those of dealers in
securities, financial institutions, insurance companies, tax exempt
organizations, real estate investment companies, regulated investment companies
and holders whose "functional currency" is not the U.S. dollar, or special rules
with respect to straddle or "hedging" transactions. The discussion below is
based upon the Internal Revenue Code of 1986, as amended and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified including retroactively so as
to result in federal income tax consequences different from those discussed
below. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF NOTES
THAT MAY BE SPECIFIC TO THEM, INCLUDING THE TAX CONSEQUENCES ARISING UNDER ANY
STATE, LOCAL OR FOREIGN LAWS.
As used in this section, the term "U.S. holder" means a beneficial owner of
a note that is for United States federal income tax purposes
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity created or organized under
the laws of the United States or any political subdivision thereof or
therein,
(3) an estate or trust described in Section 7701(a)(30) of the Code, or
(4) a person whose worldwide income or gain is otherwise subject to U.S.
federal income taxation on a net income basis.
As used in this section, the term "non-U.S. holder" means a holder of a
note that is not a U.S. holder.
EXCHANGE OF NOTES
There will be no federal income tax consequences to holders exchanging old
notes for new notes pursuant to the exchange offer since the exchange offer will
be by operation of the original terms of the old notes, pursuant to a unilateral
act by us, and will not result in any material alteration in the terms of the
old notes. Each exchanging holder will have the same adjusted tax basis and
holding period in the new notes as it had in the old notes immediately before
the exchange.
U.S. HOLDERS
Payments of Interest. Payments of stated interest on 2006 notes generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or received (in accordance with the U.S. Holder's method of
accounting for federal income tax purposes).
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Original Issue Discount. Because the old deferred coupon notes were
issued with original issue discount ("OID") for federal income tax purposes the
new notes issued in exchange for the old notes will also bear OID that each U.S.
holder of a new deferred coupon note will be required to include OID in income
as it accrues on a yield-to-maturity basis over the term of the deferred coupon
note in advance of cash payments attributable to such income (regardless of
whether the holder is a cash or accrual basis taxpayer). The amount of OID with
respect to a new deferred coupon note equals the excess of the stated redemption
price at maturity of such deferred coupon note over its issue price. The stated
redemption price at maturity of a deferred coupon note will include all payments
required to be made on the deferred coupon note, including all payments of
stated interest (other than payments subject to remote or incidental
contingencies). The issue price of the new deferred coupon notes equals the
issue price of the old deferred coupon notes, which was E573.33 per E1,000
principal amount at maturity.
A U.S. holder of a debt instrument that bears OID is required to include in
gross income an amount equal to the sum of the daily portions of OID for each
day during the taxable year in which the U.S. holder holds the debt instrument.
The daily portions of OID are determined by allocating to each day in an accrual
period the pro rata portion of the OID that is allocable to the accrual period.
The amount of OID that is allocable to an accrual period with respect to the
deferred coupon notes generally will be equal to the product of the adjusted
issue price of the deferred coupon notes at the beginning of the accrual period
(the issue price of the deferred coupon notes determined as described above,
generally increased by all prior accruals of OID and decreased by the amount of
payments made on the deferred coupon notes) and the deferred coupon notes'
yield-to-maturity (the discount rate, which, when applied to all payments under
the deferred coupon notes, results in a present value equal to the issue price
of the deferred coupon notes). In the case of the final accrual period, the
allocable OID generally is the difference between the amount payable at maturity
and the adjusted issue price at the beginning of the accrual period. All
payments on a deferred coupon note generally will be viewed first as a payment
of previously accrued OID (to the extent thereof), with payments considered made
from the earliest accrual period, and then as a payment of principal.
We will furnish annually to the IRS and to U.S. holders (other than with
respect to certain exempt holders, including, in particular, corporations)
information with respect to the OID accruing while the deferred coupon notes
were held by the U.S. holders.
Under certain circumstances described above, we will be required to pay
special interest on the notes if we fail to comply with certain of our
obligations under the registration rights agreement. Although not free from
doubt, such additional amount should be taxable to a U.S. holder as ordinary
income at the time it accrues or is received in accordance with such holder's
regular method of accounting. It is possible, however, that the IRS may take a
different position, in which case the timing and the amount of income on the
notes may be different.
If we meet the Foreign Active Business Requirement described below,
interest income (including OID) with respect to a note may be treated as foreign
source income. Due to the factual nature of this issue, it is not certain that
we will meet this requirement.
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Foreign Currency. The new notes will be denominated in a currency other
than the U.S. dollar. The following summarizes certain of the United States
federal income tax consequences to U.S. holders as a result of the notes'
foreign currency denomination.
Payments of Interest in Foreign Currency--Cash Method. A U.S. Holder who
uses the cash method of accounting for federal income tax purposes and who
receives interest on a new 2006 note or a new 2009 note will be required to
include in income the U.S. dollar value of the foreign currency payment,
determined on the date such payment is received, regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such foreign currency.
Payments of Interest in Foreign Currency--Accrual Method. A U.S. Holder
who used the accrual method of accounting for federal income tax purposes, or
who is otherwise required to accrue interest prior to receipt, will be required
to include in income the U.S. dollar value of the amount of interest income
accrued or otherwise required to be taken into account with respect to a new
2006 note or a new 2009 note during an accrual period. The U.S. dollar value of
such accrued income will be determined by translating such income at the average
rate of exchange for the accrual period, or with respect to an accrual period
that spans two taxable years, at the average rate for the partial period within
the taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the receipt of the accrued
interest, a U.S. Holder may translate such interest using the rate of exchange
on the date of receipt. The above election will apply to other debt obligations
held by the U.S. Holder and may not be changed without the consent of the IRS.
Whether or not such election is made, a U.S. Holder may recognize exchange gain
or loss (which will be treated as ordinary income or loss, but not interest
income or expense) with respect to accrued interest income on the date such
income is received. The amount of ordinary income or loss recognized will equal
the difference, if any, between the U.S. dollar value of the foreign currency
payment received (determined on the date such payment is received) in respect of
such accrual period and the U.S. dollar value of interest income that has
accrued during such accrual period (as determined above).
OID. In the case of new deferred coupon notes,
(1) OID will be determined in units of euros,
(2) such accrued discount will be translated into U.S. dollars as if the
U.S. holder were receiving interest using the accrual method of
accounting (as discussed above), and
(3) the amount of foreign currency gain or loss on the accrued discount
will be determined by comparing the amount determined under (2) with
the amount of income received attributable to the discount (either
upon payment, maturity or an earlier disposition), as translated
into U.S. dollars at the rate of exchange on the date of such
receipt.
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Disposition of New Notes. As discussed above, upon the sale, exchange or
retirement of a new note, a U.S. holder will recognize taxable gain or loss
equal to the difference between the amount realized on the sale, exchange or
retirement and such holder's adjusted tax basis in the new note. Subject to
discussions regarding gain or loss attributable to currency fluctuations, such
gain or loss generally will be capital gain or loss (except to the extent of any
amounts attributable to accrued but unpaid interest, which must be taken into
account as interest income, with exchange gain or loss computed as described in
"Payment of Interest in Foreign Currency" above) and will be long term capital
gain or loss if the note was held for more than one year. If a U.S. holder
receives foreign currency on such a sale, exchange or retirement, the amount
realized will be based on the U.S. dollar value of the foreign currency on the
date of disposition (assuming the notes are not publicly traded). A U.S.
holder's adjusted tax basis in a new note will equal the U.S. dollar cost of the
new note (determined on the date of the purchase) to such holder, and in the
case of the new deferred coupon notes, increased by the U.S. dollar value of the
amounts of any OID previously included in income by the holder with respect to
such new note and reduced by the U.S. dollar value of any payments received by
the holder. In the case of an adjustment resulting from the accrual of OID, such
adjustment will be made at the rate at which such OID is translated into U.S.
dollars under the rules described above. If a U.S. holder purchases a new note
with previously owned foreign currency, the holder will recognize ordinary
income or loss in an amount equal to the difference, if any, between such
holder's tax basis in the foreign currency and the U.S. dollar fair market value
of the foreign currency used to purchase the note, determined on the date of
purchase.
For purposes of the foregoing, there is a special rule for purchases and
sales of publicly traded notes by a cash basis taxpayer under which units of
foreign currency paid or received are translated into U.S. dollars at the spot
rate on the settlement date of the purchase or sale. In that case, no exchange
gain or loss will result from currency fluctuations between the trade date and
the settlement of such a purchase or sale. An accrual basis taxpayer may elect
the same treatment required of cash basis taxpayers with respect to purchases
and sales of publicly traded notes, provided the election is applied
consistently. Such election cannot be changed without the consent of the IRS.
Gain or loss realized upon the sale, exchange or retirement of a new note
that is attributable to fluctuations in currency exchange rates will be ordinary
income or loss, which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount (which
means, for this purpose, purchase price) of the note, determined on the date
such payment is received or the note is disposed of, and the U.S. dollar value
of the foreign currency principal amount of the note, determined on the date the
U.S. holder acquired the note. Such foreign currency gain or loss will be
recognized only to the extent of the total gain or loss realized by the U.S.
holder on the sale, exchange or retirement of the note.
Exchange of Foreign Currencies. A U.S. holder will have a tax basis in
any foreign currency received as interest or on the sale, exchange or retirement
of a new note equal to the U.S. dollar value of such foreign currency,
determined at the time the interest is
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received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is a non-U.S. holder.
Subject to the discussion of backup withholding below, payments of interest
(including OID) on a new note to any non-U.S. holder will generally not be
subject to U.S. federal income or withholding tax, provided that
(1) such holder is not
(a) a direct or indirect owner of 10% or more of the total voting power
of all our voting stock,
(b) a controlled foreign corporation related to us through stock
ownership or
(c) a foreign tax-exempt organization or a foreign private foundation
for U.S. federal income tax purposes,
(2) such interest payments are not effectively connected with the conduct by
the non-U.S. holder of a trade or business within the United States and
(3) we (or our paying agent) receive
(a) from the non-U.S. holder, a properly completed Form W-8 (or
substitute Form W-8) under penalties of perjury which provides the
non-U.S. holder's name and address and certifies that the non-U.S.
holder of the note is a non-U.S. holder or
(b) from a security clearing organization, bank or other financial
institution that holds the notes in the ordinary course of its trade
or business (a "financial institution") on behalf of the non-U.S.
holder, certification under penalties of perjury that such a Form
W-8 (or substitute Form W-8) has been received by it, or by another
such financial institution, from the non-U.S. holder, and a copy of
the Form W-8 (or substitute Form W-8) is furnished to us or our
paying agent.
A non-U.S. holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30% (or a lower applicable treaty rate) on
payments of interest (including OID) on the new notes unless the Foreign Active
Business Requirement is met, as described below.
If the payments of interest (including OID) on a new note are effectively
connected with the conduct by a non-U.S. holder of a trade or business in the
United States, such payments will be subject to U.S. federal income tax on a net
basis at the rates applicable to United States persons generally (and, with
respect to corporate holders, may also be subject to a 30% branch profits tax).
If payments are subject to U.S. federal income tax on a net basis in accordance
with the rules described in the preceding sentence, such payments will
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not be subject to United States withholding tax so long as the holder provides
us or our paying agent with a properly executed Form 4224.
In addition, if we can show to the satisfaction of the IRS that at least
80% of the gross income of NTL and certain of its subsidiaries from all sources
for the 3-year period ending with the close of NTL's taxable year preceding the
interest payment (or such period as may be applicable) is "active foreign
business income" (the "Foreign Active Business Requirement"), then interest
(including OID) on the notes would be treated as foreign source income that is
not subject to U.S. withholding. Active foreign business income is generally
gross income of a corporation derived from sources outside the U.S., or is
attributable to income so derived by a subsidiary of the corporation, which is
attributable to the active conduct of a trade or business in the foreign
jurisdiction by the corporation (or subsidiary). It is uncertain whether we
would meet the Foreign Active Business Requirement for treating interest income
as non-U.S. source.
Non-U.S. holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax exemption from or reduction of
branch profits tax, or other rules different from those described above.
Sale, Exchange or Redemption of New Notes. Subject to the discussion
concerning backup withholding, any gain realized by a non-U.S. holder on the
sale, exchange, retirement or other disposition of a note generally will not be
subject to a U.S. federal income tax, unless
(1) such gain is effectively connected with the conduct by such non-U.S. holder
of a trade or business within the United States,
(2) the non-U.S. holder is an individual who is present in the United States
for 183 days or more in the taxable year of the disposition and certain
other conditions are satisfied, or
(3) the non-U.S. holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments (including OID) with respect to the new notes and the proceeds
upon the sale or other disposition of the new notes may be subject to the
information reporting and possible U.S. backup withholding at a 31% rate. Backup
withholding will not apply to U.S. holders who furnish a correct taxpayer
identification number and provide other certification or who are otherwise
exempt from backup withholding. Copies of those information returns may also be
made available, under the provisions of a specific treaty or agreement, to the
tax authorities of the country in which the non-U.S. holder resides.
The regulations provide that backup withholding (which generally is a
withholding tax imposed at the rate of 31% on payments to persons that fail to
furnish certain required information) and information reporting will not apply
to payments made in respect to the notes by us to a non-U.S. holder, if the
holder certifies as to its non-U.S. status under penalties of perjury or
otherwise establishes an exemption (provided that neither the
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Company nor its paying agent has actual knowledge that the holder is a U.S.
person or that the condition of any other exemption are not, if fact,
satisfied).
The payment of the proceeds from the disposition of notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a note
to or through a non-U.S. office of a non-U.S. broker that is not a U.S. related
person will not be subject to information reporting or backup withholding. For
this purpose, a "U.S. related person" is
(1) a "controlled foreign corporation" for U.S. federal income tax purposes or
(2) a foreign person 50% or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of notes to or
through a non-U.S. office of a broker that is a U.S. related person, the
regulations require information reporting on the payment unless the broker has
documentary evidence in its files that the owner is a non-U.S. holder and the
broker has no knowledge to the contrary. Backup withholding will not apply to
payments made through foreign offices of a broker that is a U.S. person or a
U.S. related person (absent actual knowledge that the payee is a U.S. person.)
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be allowed as a refund or a credit against such non-U.S.
holders' federal income tax liability, provided that the requisite procedures
are followed.
The Treasury Department promulgated new final regulations regarding the
withholding and information reporting rules discussed above applicable to
non-U.S. holders. In general, the final regulations do not significantly alter
the substantive withholding and information reporting requirements but rather
unify current certification procedures and forms and clarify reliance standards.
However, the Treasury regulations may require non-U.S. holders to furnish new
certification of their foreign status. The final regulations are generally
effective for payments made after December 31, 2000, subject to certain
transition rules. Non-U.S. holders should consult their own tax advisors with
respect to the impact, if any, of the final regulations.
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES TO US AND TO CORPORATE HOLDERS
The deferred coupon notes will constitute applicable high yield discount
obligations ("AHYDOs") if
(1) their yield to maturity equals or exceeds the sum of the relevant
applicable federal rate ("AFR") plus five percentage points and
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<PAGE> 247
(2) the deferred coupon notes are issued with significant OID.
In such event, we will not be entitled to deduct OID that accrues with
respect to such deferred coupon notes until amounts attributable to such OID are
paid. In addition, if the deferred coupon notes constitute AHYDOs and their
yield to maturity exceeds the sum of the relevant AFR plus six percentage points
(the "Excess Yield"), our deduction for the "disqualified portion" of the OID
accruing on the notes will be disallowed. In general, the "disqualified portion"
of the OID for any accrual period will be equal to the product of
(1) a percentage determined by dividing the Excess Yield by the yield to
maturity and
(2) the OID for the accrual period.
Subject to otherwise applicable limitations, holders that are United States
corporations will be entitled to a dividends-received-deduction (generally at a
rate of 70%) with respect to any disqualified portion of the accrued OID to the
extent that we have sufficient current or accumulated earnings and profits. If
the disqualified portion exceeds our current and accumulated earnings and
profits, the excess will continue to be taxed as ordinary OID income in
accordance with the OID rules described above.
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<PAGE> 248
PLAN OF DISTRIBUTION
If you are a broker-dealer and hold old notes for your own account as a
result of market-making activities or other trading activities and you receive
new notes in exchange for old notes in the exchange offer, you may be a
statutory underwriter and must acknowledge that you will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We acknowledge and, unless you are a broker-dealer, you must
acknowledge that you are not engaged in, do not intend to engage in, and have no
arrangement or understanding with any person to participate in a distribution of
new notes. We have agreed that starting on the expiration date of the exchange
offer and ending on the close of business on the 180th day following the
expiration date of the exchange offer, we will make this prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of those methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any resale of that kind may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such new notes. Any broker-dealer
that resells new notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of new notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests those documents in the letter of
transmittal.
We have agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the notes, including any broker-dealers, against various liabilities,
including liabilities under the Securities Act.
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<PAGE> 249
LEGAL MATTERS
The validity of the issuance of the new notes will be passed upon for us by
Skadden, Arps, Slate, Meagher & Flom LLP, London, England.
EXPERTS
The consolidated financial statements (including schedules incorporated by
reference) of NTL Communications Corp. as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998 appearing in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing herein.
The financial statements are included in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1997 and for the
year then ended of Comcast UK Cable Partners Limited included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1997 and for the
year then ended of Birmingham Cable Corporation Limited and Cable London PLC
included in this prospectus have been audited by Deloitte & Touche, independent
auditors, as stated in their reports appearing herein and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The combined financial statements as of December 31, 1997 and for the year
then ended of ComTel UK Finance, B.V. and its subsidiaries, and the combined
financial statements of Telecential Communications (Canada) Limited and
Telecential Communications (UK) Limited as of December 31, 1996 and for the 16
months then ended, included in this prospectus have been audited by Deloitte &
Touche, independent auditors, as stated in their report appearing herein and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The combined financial information as of and for the year ended December
31, 1996 of ComTel UK Finance B.V. included in this prospectus, has been so
included in reliance on the report of Coopers & Lybrand, independent Chartered
Accountants, given on the authority of said firm as experts in auditing and
accounting.
ENFORCEABILITY OF CIVIL LIABILITIES
A substantial majority of our assets are located outside the United States.
As a result, it may not be possible for you to realize in the United States upon
judgments of courts of the United States predicated upon the civil liability
provisions under the federal securities laws of the United States. The United
States and England do not currently have a treaty providing for the reciprocal
recognition and enforcement of judgments, other than arbitration awards, in
civil and commercial matters. Therefore, a final judgment for the payment of a
fixed debt or sum of money rendered by any United States court based on
245
<PAGE> 250
civil liability, whether or not predicated solely upon the United States federal
securities laws, would not automatically be enforceable in England. In order to
enforce in England a United States judgment, proceedings must be initiated by
way of common law action before a court of competent jurisdiction in England. An
English court will, subject to what is said below, normally order summary
judgment on the basis that there is no defense to the claim for payment and will
not reinvestigate the merits of the original dispute. In such an action, an
English court will treat the United States judgment as creating a valid debt
upon which the judgment creditor could bring an action for payment, as long as
(1) the United States court had jurisdiction over the original
proceeding,
(2) the judgment is final and conclusive on the merits,
(3) the judgment does not contravene English public policy,
(4) the judgment must not be for a tax, penalty or a judgment arrived at
by doubling, trebling or otherwise multiplying a sum assessed as
compensation for the loss or damage sustained and
(5) the judgment has not been obtained by fraud or in breach of the
principles of natural justice.
Based on the foregoing, there can be no assurance that you will be able to
enforce in England judgments in civil and commercial matters obtained in any
United States court. There is doubt as to whether an English court would impose
civil liability in an original action predicated solely upon the United States
federal securities laws brought in a court of competent jurisdiction in England.
246
<PAGE> 251
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We are currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. We file reports, proxy statements,
information statements and other information with the Commission under the
Exchange Act. You can inspect and copy at prescribed rates any reports, proxy
statements, information statements and other information we file with the
Commission at the public reference facilities the Commission maintains at:
Room 1024, Judiciary Plaza,
450 Fifth Street, N.W.,
Washington, D.C. 20549,
and at the Commission's Regional Offices located at:
Suite 1400, Northwestern Atrium Center,
500 West Madison Street,
Chicago, Illinois 60661
and
13th Floor, Seven World Trade Center,
New York, New York 10048,
and you may also obtain copies of that material by mail from the Public
Reference Section of the Commission at:
450 Fifth Street, N.W.,
Washington, D.C. 20549,
The Commission also maintains a site on the World Wide Web, the address of
which is http://www.sec.gov. That site also contains our reports, proxy and
information statements and other information.
We are incorporating by reference some information about us that we file
with the Commission. We are disclosing important information to you by
referencing those filed documents. Any information that we reference this way is
considered part of this prospectus.
The following documents filed by us with the Commission are incorporated by
reference into this prospectus:
(a) NTL Communications' Annual Report on Form 10-K for the year ended
December 31, 1998, dated March 31, 1999;
(b) NTL Communications' Quarterly Reports on Form 10-Q for the
quarter ended March 31, 1999, dated May 14, 1999, for the quarter ended
June 30, 1999, dated August 12, 1999 and for the quarter ended September
30, 1999, dated November 12, 1999; and
(c) NTL Communications' Current Reports on Form 8-K dated January 25,
1999 (filed on January 25, 1999), March 8, 1999 (filed on March 11, 1999)
and March 18, 1999 (filed on March 23, 1999), April 1, 1999 (filed April 1,
1999), April 8, 1999 (filed on April 12, 1999), April 8, 1999 (filed on
April 13, 1999),
247
<PAGE> 252
June 3, 1999 (filed June 3, 1999), August 19, 1999 (filed September 17,
1999) and September 20, 1999 (filed October 4, 1999).
We will provide you without charge on your request, a copy of any or all
documents which are incorporated by reference into this prospectus, except for
exhibits which are specifically incorporated by reference into those documents.
You should make your request in writing or by telephone to:
NTL Communications Corp.
110 East 59th Street
26th Floor
New York NY 10022
Attention: Richard J. Lubasch
Tel: (212) 906-8440
Copies of these documents will be available (if and so long as any notes
are issued on the Luxembourg Stock Exchange) at the specified office of the
listing agent in Luxembourg.
248
<PAGE> 253
GENERAL INFORMATION
LISTING
A notice relating to the issue of the notes and the certificate of
incorporation of our company have been filed with the Chief Registrar of the
District Court of Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de
et a Luxembourg) where such documents are available for inspection and where
copies of such documents will be obtainable upon request.
CLEARING SYSTEMS
The International Securities Identification Number for the new Notes is
, for the new 2009 notes is and for the new deferred
coupon notes is and the common code for the new 2006 Notes is
, for the new 2009 Notes is and for the new deferred
coupon notes is .
AUTHORIZATION
The issue of the new notes was authorized by a resolution of the board of
directors of NTL on November 9, 1999.
AVAILABLE DOCUMENTS, FINANCIAL REPORTS AND INFORMATION
Copies of the indentures and the registration rights agreement referred to
herein will, if and so long as the notes are listed on the Luxembourg Stock
Exchange, be available for inspection during normal business hours at the
specified office of the listing agent in Luxembourg.
A copy of the Certificate of Incorporation and By-laws of NTL will be
available for inspection during normal business hours at the specified office of
the listing agent in Luxembourg if and so long as the notes are issued on the
Luxembourg Stock Exchange.
Whether or not required by the rules and regulations of the SEC, so long as
the notes are outstanding, NTL will file with the SEC and furnish to holders of
notes all quarterly and annual financial information required to be contained in
a filing with the SEC on Forms 10-Q and 10-K (or the equivalent thereof under
the Exchange Act for foreign private issuers in the event NTL becomes a
corporation organized under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and,
with respect to the annual information only, a report thereon by the Company's
certified independent public accountants, in each case, as required by the rules
and regulations of the SEC as in effect on November 24, 1999.
In compliance with Forms 10-Q and 10-K, NTL currently publishes audited
annual consolidated financial reports and unaudited quarterly consolidated
financial reports. If and as long as the notes are listed on the Luxembourg
Stock Exchange, copies of such reports or any other reports NTL is required to
furnish to holders of the notes in accordance with
249
<PAGE> 254
the preceding paragraph, will be available at the specified office of the
listing agent in Luxembourg. NTL does not publish unconsolidated financial
reports.
Copies of reports, proxy statements and other information concerning NTL
filed by NTL with the SEC will, if and as long as the notes are listed on the
Luxembourg Stock Exchange, be available at the specified office of the listing
agent in Luxembourg.
MATERIAL ADVERSE CHANGE
Except as disclosed in this prospectus, there has been no material adverse
change in the financial position of NTL since September 30, 1999.
250
<PAGE> 255
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-3
Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997......................................... F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1998, December 31, 1997 and December 31,
1996...................................................... F-5
Consolidated Statements of Shareholders' Equity (Deficiency)
for the Years Ended December 31, 1998, December 31, 1997
and December 31, 1996..................................... F-6
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, December 31, 1997 and December 31,
1996...................................................... F-8
Notes to Consolidated Financial Statements.................. F-9
Condensed Consolidated Balance Sheet as of September 30,
1999 (Unaudited).......................................... F-31
Condensed Consolidated Statements of Operations for the Nine
months ended September 30, 1999 and 1998 (Unaudited)...... F-32
Condensed Consolidated Statement of Shareholders' Equity for
the Nine months ended September 30, 1999 (Unaudited)...... F-33
Condensed Consolidated Statements of Cash Flows for the Nine
months ended September 30, 1999 and 1998 (Unaudited)...... F-34
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-35
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
Independent Auditors' Report................................ F-42
Consolidated Balance Sheet as of December 31, 1997.......... F-43
Consolidated Statement of Operations for the Year Ended
December 31, 1997......................................... F-44
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1997......................................... F-45
Consolidated Statement of Shareholders' Equity for the Year
Ended December 31, 1997................................... F-46
Notes to Consolidated Financial Statements.................. F-47
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK CABLE PARTNERS
LIMITED) AND SUBSIDIARIES
Condensed Consolidated Balance Sheet as of September 30,
1998 (Unaudited).......................................... F-59
Condensed Consolidated Statement of Operations and
Accumulated Deficit for the Nine Months Ended September
30, 1998 and 1997 (Unaudited)............................. F-60
Condensed Consolidated Statement of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997 (Unaudited)...... F-61
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-62
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
Independent Auditors' Report................................ F-67
Consolidated Balance Sheet as of December 31, 1997.......... F-68
Consolidated Statement of Operations for the Year Ended
December 31, 1997......................................... F-69
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1997......................................... F-70
Consolidated Statement of Shareholders' Equity for the Year
Ended December 31, 1997................................... F-71
Notes to Consolidated Financial Statements.................. F-72
</TABLE>
F-1
<PAGE> 256
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CABLE LONDON PLC AND SUBSIDIARIES
Independent Auditors' Report................................ F-79
Consolidated Balance Sheet as of December 31, 1997.......... F-80
Consolidated Statement of Operations for the Year Ended
December 31, 1997......................................... F-81
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1997......................................... F-82
Consolidated Statement of Shareholders' (Deficiency) Equity
for the Year Ended December 31, 1997...................... F-83
Notes to Consolidated Financial Statements.................. F-84
COMTEL UK FINANCE B.V.
AUDITED COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-91
Report of Independent Accountants........................... F-92
Combined Statements of Operations for each of the years in
the two year period ended December 31, 1997............... F-93
Combined Balance Sheets as of December 31, 1996 and 1997.... F-94
Combined Statements of Shareholders' Equity for each of the
years in the two year period ended December 31, 1997...... F-95
Combined Statements of Cash Flows for each of the years in
the two year period ended December 31, 1997............... F-96
Notes to the Combined Financial Statements.................. F-97
COMBINED FINANCIAL STATEMENTS
Combined Statements of Operations for each of the six month
periods ended June 30, 1997 and June 30, 1998............. F-104
Combined Balance Sheets as of June 30, 1998................. F-105
Combined Statement of Shareholders' Equity for the six month
period ended June 30, 1998................................ F-106
Combined Statements of Cash Flows for each of the six month
periods ended June 30, 1997 and June 30, 1998............. F-107
Notes to the Unaudited Combined Financial Statements........ F-108
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
AUDITED COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-110
Combined Statement of Operations for the sixteen month
period ended December 31, 1996............................ F-111
Combined Balance Sheet as of December 31, 1996.............. F-112
Combined Statement of Shareholders' Equity for the sixteen
month period ended December 31, 1996...................... F-113
Combined Statement of Cash Flows for the sixteen month
period ended December 31, 1996............................ F-114
Notes to the Combined Financial Statements.................. F-115
</TABLE>
F-2
<PAGE> 257
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
NTL COMMUNICATIONS CORP.
We have audited the consolidated balance sheets of NTL Communications Corp.
(formerly NTL Incorporated) and Subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity
(deficiency) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NTL Communications Corp. (formerly NTL Incorporated) and Subsidiaries at
December 31, 1998 and 1997, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998, in conformity with accounting principles generally accepted in the United
States.
ERNST & YOUNG LLP
New York, New York
March 26, 1999 except for the second
paragraph of Note 1 as to which
the date is April 1, 1999
F-3
<PAGE> 258
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 736,265,000 $ 98,902,000
Marketable securities..................................... 260,631,000 4,998,000
Accounts receivable -- trade, less allowance for doubtful
accounts of $38,475,000 (1998) and $8,056,000 (1997)... 152,356,000 66,022,000
Other..................................................... 55,248,000 67,232,000
-------------- --------------
TOTAL CURRENT ASSETS........................................ 1,204,500,000 237,154,000
Fixed assets, net........................................... 3,854,430,000 1,756,985,000
Intangible assets, net...................................... 725,028,000 364,479,000
Investment in Cable London PLC, net of accumulated
amortization of $3,093,000................................ 229,093,000 --
Other assets, net of accumulated amortization of $56,264,000
(1998) and $25,889,000 (1997)............................. 181,046,000 63,021,000
-------------- --------------
TOTAL ASSETS................................................ $6,194,097,000 $2,421,639,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 167,079,000 $ 45,475,000
Accrued expenses and other................................ 221,070,000 163,158,000
Accrued construction costs................................ 88,033,000 26,930,000
Interest payable.......................................... 34,258,000 18,875,000
Deferred revenue.......................................... 69,820,000 35,060,000
Current portion of long-term debt......................... 23,691,000 --
-------------- --------------
TOTAL CURRENT LIABILITIES................................... 603,951,000 289,498,000
Long-term debt.............................................. 5,043,803,000 2,015,057,000
Commitments and contingent liabilities
Deferred income taxes....................................... 67,062,000 70,218,000
Senior redeemable exchangeable preferred stock -- $.01 par
value, plus accreted dividends; liquidation preference
$125,000,000; less unamortized discount of $3,133,000
(1998) and $3,444,000 (1997); issued and outstanding
125,000 (1998) and 110,000 (1997) shares.................. 124,127,000 108,534,000
SHAREHOLDERS' EQUITY (DEFICIENCY):
Series preferred stock -- $.01 par value; authorized
10,000,000 shares:
Series A -- liquidation preference $128,760,000; issued
and outstanding 125,000 (1998) and none (1997)
shares;................................................ 2,000 --
Series B -- liquidation preference $52,517,000; issued and
outstanding 52,000 (1998) and none (1997) shares;...... -- --
Series A -- issued and outstanding none (1998) and 780
(1997) shares.......................................... -- --
Common stock -- $.01 par value; authorized 400,000,000
shares; issued and outstanding 60,249,000 (1998) and
32,210,000 (1997) shares.................................. 602,000 322,000
Additional paid-in capital.................................. 1,501,561,000 538,054,000
Accumulated other comprehensive income...................... 104,657,000 117,008,000
(Deficit)................................................... (1,251,668,000) (717,052,000)
-------------- --------------
355,154,000 (61,668,000)
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)..... $6,194,097,000 $2,421,639,000
============== ==============
</TABLE>
See accompanying notes.
F-4
<PAGE> 259
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Local telecommunications and television........ $ 355,589,000 $ 166,951,000 $ 89,209,000
National and international
telecommunications........................... 248,895,000 185,194,000 45,430,000
Broadcast transmission and other............... 140,156,000 130,799,000 83,618,000
Other telecommunications....................... 2,375,000 8,831,000 10,086,000
------------- ------------- -------------
747,015,000 491,775,000 228,343,000
COSTS AND EXPENSES
Operating expenses............................. 372,134,000 301,644,000 144,315,000
Selling, general and administrative expenses... 299,494,000 169,133,000 114,992,000
Franchise fees................................. 25,036,000 23,587,000 13,117,000
Corporate expenses............................. 17,048,000 18,324,000 14,899,000
Nonrecurring charges........................... (4,194,000) 20,642,000 --
Depreciation and amortization.................. 266,112,000 150,509,000 98,653,000
------------- ------------- -------------
975,630,000 683,839,000 385,976,000
------------- ------------- -------------
OPERATING (LOSS)............................... (228,615,000) (192,064,000) (157,633,000)
OTHER INCOME (EXPENSE)
Interest and other income...................... 46,024,000 28,415,000 33,634,000
Interest expense............................... (328,815,000) (202,570,000) (137,032,000)
Other gains.................................... -- 21,497,000 --
Foreign currency transaction gains............. 4,152,000 574,000 2,408,000
------------- ------------- -------------
(LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS
AND EXTRAORDINARY ITEM....................... (507,254,000) (344,148,000) (258,623,000)
Income tax benefit (provision)................. 3,327,000 15,591,000 (7,653,000)
------------- ------------- -------------
(LOSS) BEFORE MINORITY INTERESTS AND
EXTRAORDINARY ITEM........................... (503,927,000) (328,557,000) (266,276,000)
Minority interests............................. -- -- 11,822,000
------------- ------------- -------------
(LOSS) BEFORE EXTRAORDINARY ITEM............... (503,927,000) (328,557,000) (254,454,000)
(Loss) from early extinguishment of debt....... (30,689,000) (4,500,000) --
------------- ------------- -------------
NET (LOSS)..................................... $(534,616,000) $(333,057,000) $(254,454,000)
============= ============= =============
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE:
(Loss) before extraordinary item............. $ (12.69) $ (10.60) $ (8.20)
Extraordinary item........................... (.74) (.14) --
------------- ------------- -------------
NET (LOSS) PER COMMON SHARE.................... $ (13.43) $ (10.74) $ (8.20)
============= ============= =============
</TABLE>
See accompanying notes.
F-5
<PAGE> 260
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES A SERIES A SERIES B
PREFERRED PREFERRED PREFERRED COMMON STOCK
STOCK STOCK STOCK $.01 PAR VALUE
------------ ---------------- ------------ ---------------------
SHARES PAR SHARES PAR SHARES PAR SHARES PAR
------ --- ------- ------ ------ --- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995............... 30,202,000 $302,000
Exercise of stock options................ 396,000 4,000
Exercise of warrants..................... 53,000 1,000
Issuance of warrants in connection with
consent solicitations..................
Shares issued for acquisitions........... 780 $-- 1,415,000 14,000
Comprehensive income:
Net loss for the year ended December 31,
1996...................................
Currency translation adjustment..........
Total................................
---- -- ------- ------ ------ -- ---------- --------
BALANCE, DECEMBER 31, 1996............... 780 -- 32,066,000 321,000
Exercise of stock options................ 119,000 1,000
Exercise of warrants..................... 25,000
Accreted dividends on senior redeemable
exchangeable preferred stock...........
Accretion of discount on senior
redeemable exchangeable preferred
stock..................................
Comprehensive income:
Net loss for the year ended December 31,
1997...................................
Currency translation adjustment..........
Total................................
---- -- ------- ------ ------ -- ---------- --------
BALANCE, DECEMBER 31, 1997............... 780 -- 32,210,000 322,000
Exercise of stock options................ 298,000 3,000
Exercise of warrants..................... 70,000
Accreted dividends on preferred stock....
Accretion of discount on preferred
stock..................................
Conversion of 7 1/4% Convertible
Subordinated Notes..................... 6,958,000 70,000
Conversion of Series Preferred Stock..... (780) 1,950,000 20,000
Preferred stock issued for acquisition... 125,000 $2,000 52,000 --
Common stock issued for acquisition...... 18,763,000 187,000
Issuance of warrants in connection with
consent solicitations..................
Comprehensive income:
Net loss for the year ended December 31,
1998...................................
Currency translation adjustment..........
Total................................
---- -- ------- ------ ------ -- ---------- --------
BALANCE, DECEMBER 31, 1998............... -- $-- 125,000 $2,000 52,000 $-- 60,249,000 $602,000
==== == ======= ====== ====== == ========== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 261
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY) -- (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE COMPREHENSIVE
CAPITAL LOSS INCOME (DEFICIT)
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995.................... $ 462,223,000 $ 6,273,000 $ (129,541,000)
Exercise of stock options..................... 1,362,000
Exercise of warrants.......................... 298,000
Issuance of warrants in connection with
consent solicitations....................... 1,641,000
Shares issued for acquisitions................ 83,123,000
Comprehensive income:
Net loss for the year ended December 31,
1996........................................ $(254,454,000) (254,454,000)
Currency translation adjustment............... 156,868,000 156,868,000
-------------
Total..................................... $ (97,586,000)
-------------- ------------- ------------ ---------------
BALANCE, DECEMBER 31, 1996.................... 548,647,000 163,141,000 (383,995,000)
Exercise of stock options..................... 1,532,000
Exercise of warrants.......................... 138,000
Accreted dividends on senior redeemable
exchangeable preferred stock................ (11,978,000)
Accretion of discount on senior redeemable
exchangeable preferred stock................ (285,000)
Comprehensive income:
Net loss for the year ended December 31,
1997........................................ $(333,057,000) (333,057,000)
Currency translation adjustment............... (46,133,000) (46,133,000)
-------------
Total..................................... $(379,190,000)
-------------- ------------- ------------ ---------------
BALANCE, DECEMBER 31, 1997.................... 538,054,000 117,008,000 (717,052,000)
Exercise of stock options..................... 6,331,000
Exercise of warrants.......................... 508,000
Accreted dividends on preferred stock......... (18,761,000)
Accretion of discount on preferred stock...... (311,000)
Conversion of 7 1/4% Convertible Subordinated
Notes....................................... 186,942,000
Conversion of Series Preferred Stock.......... (20,000)
Preferred stock issued for acquisition........ 178,493,000
Common stock issued for acquisition........... 600,245,000
Issuance of warrants in connection with
consent solicitations....................... 10,080,000
Comprehensive income:
Net loss for the year ended December 31,
1998........................................ $(534,616,000) (534,616,000)
Currency translation adjustment............... (12,351,000) (12,351,000)
-------------
Total................................ $(546,967,000)
-------------- ============= ------------ ---------------
BALANCE, DECEMBER 31, 1998.................... $1,501,561,000 $104,657,000 $(1,251,668,000)
============== ============ ===============
</TABLE>
See accompanying notes.
F-7
<PAGE> 262
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1998 1997 1996
--------------- ------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (534,616,000) $(333,057,000) $ (254,454,000)
Adjustment to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization............................. 266,112,000 150,509,000 98,653,000
Loss from early extinguishment of debt.................... 30,689,000 4,500,000 --
Amortization of non competition agreements................ 1,389,000 1,852,000 2,906,000
Provision for losses on accounts receivable............... 27,282,000 6,891,000 2,597,000
Minority interests........................................ -- -- (11,822,000)
Deferred income taxes..................................... (3,327,000) (16,852,000) 5,063,000
Amortization of original issue discount................... 232,691,000 122,639,000 104,264,000
Other..................................................... (30,916,000) (8,148,000) 8,578,000
Changes in operating assets and liabilities, net of effect
from business acquisitions:
Accounts receivable..................................... (70,364,000) (30,430,000) 10,050,000
Other current assets.................................... 22,631,000 (6,563,000) (20,316,000)
Other assets............................................ 6,000 2,303,000 (24,000)
Accounts payable........................................ (2,564,000) (4,615,000) (2,869,000)
Accrued expenses and other.............................. 15,272,000 74,706,000 35,691,000
Deferred revenue........................................ 26,772,000 18,994,000 278,000
--------------- ------------- ---------------
Net cash (used in) operating activities..................... (18,943,000) (17,271,000) (21,405,000)
INVESTING ACTIVITIES
Purchase of fixed assets.................................... (772,144,000) (503,656,000) (505,664,000)
Payment of deferred purchase price.......................... -- (57,330,000) --
Increase in other assets.................................... (35,595,000) (4,322,000) (6,013,000)
Acquisitions of subsidiaries and minority interests, net of
cash acquired............................................. (746,817,000) -- (332,693,000)
Proceeds from sales of assets............................... 1,312,000 -- --
Purchase of marketable securities........................... (540,639,000) (145,939,000) --
Proceeds from sales of marketable securities................ 291,276,000 142,596,000 --
--------------- ------------- ---------------
Net cash (used in) investing activities..................... (1,802,607,000) (568,651,000) (844,370,000)
FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred stock, net of
financing costs........................................... $ 3,525,588,000 $ 490,302,000 $ 1,146,190,000
Principal payments.......................................... (845,018,000) (242,424,000) (95,283,000)
Cash placed in escrow....................................... (217,622,000) -- --
Cash released from escrow................................... -- -- 1,600,000
Proceeds from borrowings from minority partner.............. -- -- 31,232,000
Consent solicitation payments............................... (11,333,000) -- --
Proceeds from exercise of stock options and warrants........ 6,842,000 1,671,000 1,665,000
--------------- ------------- ---------------
Net cash provided by financing activities................... 2,458,457,000 249,549,000 1,085,404,000
Effect of exchange rate changes on cash..................... 456,000 (10,609,000) 50,972,000
--------------- ------------- ---------------
Increase (decrease) in cash and cash equivalents............ 637,363,000 (346,982,000) 270,601,000
Cash and cash equivalents at beginning of year.............. 98,902,000 445,884,000 175,283,000
--------------- ------------- ---------------
Cash and cash equivalents at end of year.................... $ 736,265,000 $ 98,902,000 $ 445,884,000
=============== ============= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized....................................... $ 90,513,000 $ 72,047,000 $ 27,595,000
Income taxes paid........................................... 336,000 1,107,000 367,000
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock...... $ 19,072,000 $ 12,263,000 $ --
Conversion of Convertible Notes, net of unamortized deferred
financing costs of $4,738,000............................. 187,012,000 -- --
Preferred stock issued for acquisitions..................... 178,495,000 -- --
Common stock issued for acquisitions........................ 600,432,000 -- 34,137,000
Warrants issued in connection with consent solicitations.... 10,080,000 -- 1,641,000
Preferred stock issued for acquisition of minority interest,
including notes payable to minority partner............... -- -- 49,000,000
Liabilities incurred in connection with acquisitions........ -- -- 81,906,000
</TABLE>
See accompanying notes.
F-8
<PAGE> 263
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
NTL Communications Corp. (formerly NTL Incorporated) (the "Company"),
through its subsidiaries and joint ventures, owns and operates television and
radio broadcasting, cable television, telephone and telecommunications systems
in the United Kingdom. Based on revenues and identifiable assets, the Company's
predominant lines of business are television and radio broadcasting, cable
television, telephone and telecommunications services in the United Kingdom.
Corporate Restructuring
Effective April 1, 1999, NTL Incorporated completed a corporate
restructuring to create a holding company structure. The formation of the
holding company is part of NTL Incorporated's effort to pursue opportunities
outside the United Kingdom and Ireland. The holding company restructuring was
accomplished through a merger so that all the stockholders of NTL Incorporated
at the effective time of the merger became stockholders of the new holding
company, and NTL Incorporated became a subsidiary of the new holding company.
The new holding company has taken the name NTL Incorporated and the holding
company's subsidiary simultaneously changed its name to NTL Communications Corp.
In addition, in April 1999, the Company distributed $500 million to NTL
Incorporated.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and entities where the Company's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." All
balance sheet accounts have been translated using the current exchange rates at
the respective balance sheet dates. Statement of operations amounts have been
translated using the average exchange rates for the respective years. The gains
or losses resulting from the change in exchange rates have been reported as a
component of accumulated other comprehensive income.
Cash Equivalents
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $651,242,000 and
$55,894,000 at December 31, 1998 and 1997, respectively, which consisted
primarily of corporate commercial paper. At December 31, 1998 and 1997,
$120,734,000 and none, respectively, of the cash equivalents were denominated in
British pounds sterling.
Marketable Securities
Marketable securities are classified as available-for-sale, which are
carried at fair value. Unrealized holding gains and losses on securities, net of
tax, are carried as a component of accumulated other
F-9
<PAGE> 264
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
comprehensive income. The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary are included in interest
income. The cost of securities sold or matured is based on the specific
identification method. Interest on securities is included in interest income.
Marketable securities at December 31, 1998 consisted principally of
corporate commercial paper. Marketable securities at December 31, 1997 consisted
of federal agency notes. During the years ended December 31, 1998, 1997 and
1996, there were no realized gains or losses on sales of securities. All of the
marketable securities as of December 31, 1998 and 1997 had a contractual
maturity of less than one year.
Fixed Assets
Fixed assets are stated at cost, which includes amounts capitalized for
labor and overhead expended in connection with the design and installation of
operating equipment. Depreciation is computed by the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
operating equipment -- 5 to 40 years and other equipment -- 3 to 40 years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
Investments
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the investee
are accounted for under the equity method. Equity method investments are
recorded at original cost and adjusted periodically to recognize the Company's
proportionate share of the investees' net income or losses after the date of
investment, additional contributions made and dividends received. The difference
between the Company's recorded investment and its proportionate interest in the
book value of the investees' net assets are being amortized on a straight-line
basis over 10 years.
Intangible Assets
Intangible assets include goodwill, license acquisition costs and customer
lists. Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over the periods benefited of 15 or 30 years.
License acquisition costs represent the portion of purchase price allocated to
the licenses acquired in business combinations. License acquisition costs are
amortized on a straight-line basis over the remaining lives of the licenses at
acquisition, which vary from approximately two years to 23 years. Customer lists
represent the portion of the purchase price allocated to the value of the
customer base. Customer lists are amortized on a straight-line basis over 5
years. The Company continually reviews the recoverability of the carrying value
of these assets using the same methodology that it uses for the evaluation of
its other long-lived assets.
Deferred Financing Costs
Deferred financing costs were incurred in connection with the issuance of
debt and are amortized over the term of the related debt.
F-10
<PAGE> 265
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capitalized Interest
Interest is capitalized as a component of the cost of fixed assets
constructed. In 1998, 1997 and 1996, interest of $27,760,000, $6,770,000 and
$10,294,000, respectively, was capitalized.
Revenue Recognition
Revenues are recognized at the time the service is provided to the
customer.
Cable Television System Costs, Expenses and Revenues
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable television, telephone and
telecommunications systems in accordance with SFAS No. 51, "Financial Reporting
by Cable Television Companies."
Advertising Expense
The Company charges the cost of advertising to expense as incurred.
Advertising costs were $33,951,000, $31,003,000 and $22,727,000 in 1998, 1997
and 1996, respectively.
Net (Loss) Per Share
The Company reports its basic and diluted net (loss) per share in
accordance with Financial Accounting Standards Board ("FASB") SFAS No. 128,
"Earnings Per Share".
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted the following Statements of Financial
Accounting Standards:
- SFAS 130, "Reporting Comprehensive Income", which requires the components
of comprehensive income to be disclosed in the financial statements.
- SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information", which requires disclosures of certain information about the
Company's operating segments on a basis consistent with the way in which
the Company is managed and operated.
- SFAS 132, "Employer's Disclosures about Pensions and Other Postretirement
Benefits", which revises disclosures about pensions and other
postretirement benefits and requires presentation of information about
such plans in a standardized format.
Adoption of these new standards required that the Company make certain new
disclosures in the consolidated financial statements or in the notes to the
consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2000. The Company is currently evaluating the
impact the adoption of SFAS No. 133 will have on its earnings and financial
position.
F-11
<PAGE> 266
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Need for Additional Financing
The Company will require additional financing in the future. There can be
no assurance that the required financing will be obtainable on acceptable terms.
Concentrations
The Company's television and radio broadcasting business is substantially
dependent upon contracts with a small group of companies for the right to
broadcast their programming, and upon a site sharing agreement for a large
number of its transmission sites. The loss of any one of these contracts or the
site sharing agreement could have a material adverse effect on the business of
the Company.
Currency Risk
To the extent that the Company obtains financing in United States dollars
and incurs construction and operating costs in British pounds sterling, it will
encounter currency exchange rate risks. In addition, the Company's revenues are
generated primarily in British pounds sterling while its interest and principal
obligations with respect to most of the Company's existing indebtedness are
payable in United States dollars.
5. FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Operating equipment.................................. $3,528,973,000 $1,612,440,000
Other equipment...................................... 376,518,000 225,514,000
Construction-in-progress............................. 369,923,000 134,795,000
-------------- --------------
4,275,414,000 1,972,749,000
Accumulated depreciation............................. (420,984,000) (215,764,000)
-------------- --------------
$3,854,430,000 $1,756,985,000
============== ==============
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
License acquisition costs, net of accumulated
amortization of $69,202,000 (1998) and $46,620,000
(1997)................................................ $153,007,000 $123,116,000
Goodwill, net of accumulated amortization of $32,358,000
(1998) and $13,449,000 (1997)........................... 514,529,000 241,363,000
Customer lists, net of accumulated amortization of
$3,375,000............................................ 57,492,000 --
------------ ------------
$725,028,000 $364,479,000
============ ============
</TABLE>
The Company made the following acquisitions in 1998:
(i) The Company acquired ComTel Limited and Telecential
Communications (collectively, "ComTel") for a total of L550 million
comprised of L475 million in cash and 125,000 shares of 9.9%
F-12
<PAGE> 267
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Non-voting Mandatorily Redeemable Preferred Stock, Series A in two stages
completed in June and September 1998. The Company financed the cash portion
of the transaction through a bank loan, completed through an amendment to
the Company's then existing bank facility with The Chase Manhattan Bank.
The preferred stock was valued at L75 million, based on an appraisal as of
the date of issuance. ComTel is a provider of cable television and
telecommunications services in England.
(ii) In October 1998, a wholly-owned subsidiary of the Company, NTL
(Bermuda) Limited ("NTL Bermuda") acquired all of the outstanding common
stock of Comcast UK Cable Partners Limited ("Partners") in exchange for
18,763,000 shares of the Company's common stock. The Company's common stock
was valued at $600,432,000, the fair value on the date prior to the
announcement. Partners provides cable television and telecommunications
services in England.
(iii) In December 1998, the Company acquired Eastern Group Telecoms
("EGT") for L60 million in cash and 52,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series B. The preferred stock was
valued at $52,217,000, based on an appraisal as of the date of issuance.
EGT's telecoms division has a fibre-optic network across portions of
England, and its radio sites division serves mobile phone operators in
portions of England.
These acquisitions have been accounted for as purchases, and accordingly,
the net assets and results of operations of the acquired businesses have been
included in the consolidated financial statements from the dates of acquisition.
The aggregate purchase price of $1.7 billion, which includes the related
acquisition costs and the return of cash acquired in the ComTel transaction of
L31 million, exceeded the fair value of the net tangible assets acquired by $591
million, which has been allocated as follows: $185.6 million to the investment
in Cable London PLC, $52.4 million to license acquisition costs, $60.9 million
to customer lists and $292.1 million to goodwill.
The pro forma unaudited consolidated results of operations for the years
ended December 31, 1998 and 1997 assuming consummation of the above mentioned
transactions as of January 1, 1997 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Total revenue......................................... $ 966,694,000 $ 667,534,000
(Loss) before extraordinary item...................... (627,249,000) (618,510,000)
Net loss.............................................. (657,938,000) (623,010,000)
Basic and diluted net loss per share:
(Loss) before extraordinary item.................... (11.54) (12.64)
Net (loss).......................................... (12.08) (12.73)
</TABLE>
In 1996, the Company acquired (i) the remaining 40% interest it did not
already own in CableTel Newport, which owns and operates cable television and
telecommunications franchises in South Wales, (ii) the remaining 30% interest it
did not already own in English Cable Enterprises, Inc., which owns and operates
cable television and telecommunications franchises in the northern suburbs of
London and (iii) all of the outstanding shares of NTL Group Limited, which
provides television and radio transmission services and a range of other
services in the broadcasting and telecommunications industries. The NTL Group
Limited acquisition was accounted for as a purchase, and accordingly, the net
assets and results of operations of NTL Group Limited was included in the
consolidated financial statements from the date of acquisition. The aggregate
purchase price for these acquisitions including the costs incurred was $526
million, consisting of 780 shares of Series A Preferred Stock, 1,415,000 shares
of common stock and cash of L256.1 million (of which L35 million was paid in
1997). The 780 shares of Series A Preferred Stock were valued at $49 million,
based on an appraisal as of the date of issuance. The 1,415,000 shares of common
stock were
F-13
<PAGE> 268
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
valued at $34 million, based on the market price on the date of issuance. The
aggregate purchase price exceeded the aggregate fair value of the net tangible
assets acquired by $273 million, which was allocated $10 million to license
acquisition costs and $263 million to goodwill.
7. INVESTMENT IN CABLE LONDON PLC
NTL Bermuda has a 50% ownership interest in Cable London PLC ("Cable
London"). Cable London operates integrated cable television and
telecommunications systems in the London metropolitan area. Included in the
investment in Cable London as of December 31, 1998 are loans to Cable London of
L28.5 million ($47.3 million) and accrued interest of (pound)8.6 million ($14.3
million). The loans accrue interest at a rate of 2% above the published base
lending rate of Barclays Bank PLC (8.25% effective rate as of December 31, 1998)
and are subordinate to Cable London's revolving bank credit facility. Of these
loans, L21.0 million ($34.8 million) are convertible into ordinary shares of
Cable London at a conversion price of L2.00 ($3.32) per share.
In August 1998, Partners and Telewest Communications plc ("Telewest")
entered into an agreement to rationalize their joint ownership of Cable London
pursuant to an agreed procedure (the "Shoot-out"). Between April 29 and July 29,
1999, NTL Bermuda can notify Telewest of the price at which it is willing to
sell its 50% ownership interest in Cable London to Telewest. Following such
notification, Telewest at its option will be required at that price to either
purchase NTL Bermuda's 50% ownership interest in Cable London or sell its 50%
ownership interest in Cable London to NTL Bermuda. If NTL Bermuda fails to give
notice to Telewest by July 29, 1999, it will be deemed to have delivered an
offer notice for L100 million ($166 million).
8. DIAMOND ACQUISITION
The Company acquired Diamond Cable Communications plc ("Diamond") in March
1999. The Company issued an aggregate of approximately 13 million shares in
exchange for each ordinary share and deferred share of Diamond at a ratio of .85
shares of the Company's common stock for four Diamond ordinary shares or one
deferred share. Diamond had five different notes outstanding at December 31,
1998 for an aggregate principal amount at maturity of $1.6 billion. Diamond
intends to commence an offer to repurchase its outstanding notes at 101% of
their accreted value or principal amount on or about April 1, 1999 pursuant to
the "change of control" provisions of the indentures. The offer will expire 30
days thereafter. The Company has entered into a bridge facility to finance the
redemption of Diamond bonds tendered, if any, which is subject to certain
funding conditions.
F-14
<PAGE> 269
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
10 7/8% Senior Deferred Coupon Notes ("10 7/8% Notes")(a)... $ -- $ 194,959,000
12 3/4% Series A Senior Deferred Coupon Notes ("12 3/4%
Notes")(b).................................................. 236,935,000 209,387,000
11 1/2% Series B Senior Deferred Coupon Notes ("11 1/2%
Series B Notes")(c)....................................... 831,976,000 743,961,000
10% Series B Senior Notes ("10% Notes")(d).................. 400,000,000 400,000,000
9 1/2% Senior Sterling Notes, less unamortized discount of
$639,000 ("Sterling Senior Notes")(e)..................... 206,800,000 --
10 3/4% Senior Deferred Coupon Sterling Notes ("Sterling
Deferred Coupon Notes")(f)................................ 317,511,000 --
9 3/4% Senior Deferred Coupon Notes ("9 3/4% Notes")(g)..... 865,880,000 --
11 1/2% Senior Notes ("11 1/2% Notes")(h)................... 625,000,000 --
12 3/8% Senior Deferred Coupon Notes ("12 3/8 Notes")(i).... 254,718,000 --
7 1/4% Convertible Subordinated Notes ("7 1/4 Convertible
Notes")(j)................................................ -- 191,750,000
7% Convertible Subordinated Notes ("7% Convertible
Notes")(k)................................................ 275,000,000 275,000,000
7% Convertible Subordinated Notes ("New Convertible
Notes")(l)................................................ 600,000,000 --
11.2% Senior Discount Debentures ("11.2% Debentures")(m).... 421,835,000 --
Other(n).................................................... 31,839,000 --
-------------- --------------
5,067,494,000 2,015,057,000
Less current portion........................................ 23,691,000 --
-------------- --------------
$5,043,803,000 $2,015,057,000
============== ==============
</TABLE>
(a) In October 1998, the Company redeemed the 10 7/8% Notes with an
accreted value of $211 million for cash of $218 million. The Company
recorded an extraordinary loss from the early extinguishment of the 10 7/8%
Notes of approximately $12.1 million in 1998, which includes $4.8 million
of unamortized deferred financing costs. In October 1993, the Company
issued $212,000,000 aggregate principal amount of 10 7/8% Notes due 2003 at
a price to the public of 58.873% or $124,811,000. During 1998, 1997 and
1996, the Company recognized $15,344,000, $19,591,000 and $17,620,000,
respectively, of the original issue discount as interest expense.
(b) In April 1995, the Company issued $277,803,500 aggregate
principal amount of 12 3/4% Senior Deferred Coupon Notes due 2005. The
12 3/4% Notes were issued at a price to the public of 53.995% or
$150,000,000. The Company incurred $6,192,000 in fees and expenses in
connection with the issuance of 12 3/4% Notes which is included in deferred
financing costs. The original issue discount accretes at a rate of 12 3/4%,
compounded semiannually, to an aggregate principal amount of $277,803,500
by April 15, 2000. Interest will thereafter accrue at 12 3/4% per annum,
payable semiannually beginning on October 15, 2000. During 1998, 1997 and
1996, the Company recognized $27,548,000, $24,344,000 and $21,515,000,
respectively, of original issue discount as interest expense. The 12 3/4%
Notes may be redeemed at the Company's option, in whole or in part, at any
time on or after April 15, 2000 at 103.64% the first year, 101.82% the
second year and 100% thereafter, plus accrued and unpaid interest to the
date of redemption.
F-15
<PAGE> 270
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) In January 1996, the Company issued $1,050,000,000 aggregate
principal amount of 11 1/2% Series B Senior Deferred Coupon Notes due 2006.
The 11 1/2% Series B Notes were issued at a price of 57.155% of the
aggregate principal amount at maturity or $600,127,500. The Company
incurred $19,273,000 in fees and expenses in connection with the issuance
of the 11 1/2% Series B Notes which is included in deferred financing
costs. The original issue discount accretes at a rate of 11 1/2%,
compounded semiannually, to an aggregate principal amount of $1,050,000,000
by February 1, 2001. Interest will thereafter accrue at 11 1/2% per annum,
payable semiannually beginning on August 1, 2001. During 1998, 1997 and
1996, the Company recognized $88,015,000, $78,704,000 and $65,129,000 of
original issue discount as interest expense. The 11 1/2% Series B Notes may
be redeemed at the Company's option, in whole or in part, at any time on or
after February 1, 2001 at 105.75% the first year, 102.875% the second year
and 100% thereafter, plus accrued and unpaid interest to the date of
redemption.
(d) In February 1997, the Company issued $400,000,000 aggregate
principal amount of 10% Series B Senior Notes due 2007. The Company
received net proceeds of $389,000,000 after discounts and commissions from
the issuance of the 10% Notes. Discounts, commissions and other fees
incurred of $11,885,000 are included in deferred financing costs. The 10%
Notes accrue interest at 10% per annum, payable semiannually as of August
15, 1997. The 10% Notes may be redeemed at the Company's option, in whole
or in part, at any time on or after February 15, 2002 at a redemption price
of 105% that declines annually to 100% in 2005, in each case together with
accrued and unpaid interest to the date of redemption.
(e) In March 1998, the Company issued L125,000,000 aggregate
principal amount of 9 1/2% Senior Notes due 2008. The Sterling Senior Notes
were issued at 99.67% or L124.6 million. The aggregate of the discounts,
commissions and other fees incurred of $5,981,000 is included in deferred
financing costs. The Sterling Senior Notes accrue interest at 9 1/2% per
annum, payable semiannually, which commenced on October 1, 1998. The
Sterling Senior Notes may be redeemed at the Company's option, in whole or
in part, at any time on or after April 1, 2003, at a redemption price of
104 3/4% to 105 3/8% that declines annually to 100% in 2006, in each case
together with accrued and unpaid interest to the date of redemption.
(f) In March 1998, the Company issued L300,000,000 aggregate
principal amount at maturity of 10 3/4% Senior Deferred Coupon Sterling
Notes due 2008. The Sterling Deferred Coupon Notes were issued at 58.62% or
L175.9 million. The aggregate of the discounts, commissions and other fees
incurred of $9,181,000 is included in deferred financing costs. The
original issue discount of the Sterling Deferred Coupon Notes accretes at a
rate of 10 3/4%, compounded semiannually, to an aggregate principal amount
of L300,000,000 by April 1, 2003. Interest on the Sterling Deferred Coupon
Notes will thereafter accrue at 10 3/4% per annum payable semiannually
beginning on October 1, 2003. In 1998, the Company recognized $25,697,000
of the original issued discount as interest expense. The Sterling Deferred
Coupon Notes may be redeemed at the Company's option, in whole or in part,
at any time on or after April 1, 2003, at a redemption price of 105 3/8%
that declines annually to 100% in 2006, together with accrued and unpaid
interest to the date of redemption.
(g) In March 1998, the Company issued $1.3 billion aggregate
principal amount at maturity of 9 3/4% Senior Deferred Coupon Notes due
2008. The 9 3/4% Notes were issued at 61.724% or $802.4 million. The
aggregate of the discounts, commissions and other fees incurred of
$24,931,000 is included in deferred financing costs. The original issue
discount of the 9 3/4% Notes accretes at a rate of 9 3/4%, compounded
semiannually, to an aggregate principal amount of $1.3 billion by April 1,
2003. Interest on the 9 3/4% Notes will thereafter accrue at 9 3/4% per
annum payable semiannually beginning on October 1, 2003. In 1998, the
Company recognized $63,468,000 of the original issued discount as interest
expense. The Sterling Deferred Coupon Notes may be redeemed at the
Company's option, in
F-16
<PAGE> 271
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
whole or in part, at any time on or after April 1, 2003, at a redemption
price of 105 3/8% that declines annually to 100% in 2006, together with
accrued and unpaid interest to the date of redemption.
(h) In November 1998, the Company issued $625,000,000 aggregate
principal amount of 11 1/2% Senior Notes due 2008. The aggregate of the
discounts, commissions and other fees incurred of $18,253,000 is included
in deferred financing costs. The 11 1/2% Notes accrue interest at 11 1/2%
per annum, payable semiannually beginning on April 1, 1999. The 11 1/2%
Notes may be redeemed, at the Company's option, in whole or in part, at any
time on or after October 1, 2003 at a redemption price of 105.75% that
declines annually to 100% in 2006, in each case together with accrued and
unpaid interest to the date of redemption.
(i) In November 1998, the Company issued $450,000,000 aggregate
principal amount at maturity of 12 3/8% Senior Deferred Coupon Notes due
2008. The 12 3/8% Notes were issued at 55.505% or $249,773,000. The
aggregate of the discounts, commissions and other fees incurred of
$8,040,000 is included in deferred financing costs. The original issue
discount on the 12 3/8% Notes accretes at a rate of 12 3/8%, compounded
semiannually, to an aggregate principal amount of $450,000,000 by October
1, 2003. Interest will thereafter accrue at 12 3/8% per annum, payable
semiannually beginning on April 1, 2004. In 1998, the Company recognized
$4,945,000 of the original issue discount as interest expense. The 12 3/8%
Notes may be redeemed, at the Company's option, in whole or in part, at any
time on or after October 1, 2003 at a redemption price of 106.188% that
declines annually to 100% in 2006, in each case together with accrued and
unpaid interest to the date of redemption.
(j) In April and May 1995, the Company issued $191,750,000 principal
amount of 7 1/4% Convertible Subordinated Notes due 2005. In March 1998,
the Company called for redemption all of the 7 1/4% Convertible Notes. The
redemption date was April 20, 1998, at a redemption price of 105.08% of the
principal amount plus accrued and unpaid interest through the date of
redemption. The 7 1/4% Convertible Notes were convertible into common stock
at a conversion price of $27.56 per share. In April 1998, all of the 7 1/4%
Convertible Notes were converted into approximately 6,958,000 shares of the
Company's common stock.
(k) In June 1996, the Company issued $275,000,000 aggregate principal
amount of 7% Convertible Subordinated Notes due 2008. Interest payments
began on December 15, 1996 and interest is payable every six months
thereafter. The 7% Convertible Notes mature on June 15, 2008. The 7%
Convertible Notes are unsecured obligations convertible into shares of
common stock prior to maturity at a conversion price of $37.875 per share,
subject to adjustment. There are approximately 7,261,000 shares of common
stock reserved for issuance upon conversion of the 7% Convertible Notes.
The 7% Convertible Notes are redeemable, in whole or in part, at the option
of the Company at any time on or after June 15, 1999, at a redemption price
of 104.9% that declines annually to 100% in 2006, in each case together
with accrued and unpaid interest to the redemption date. The Company
incurred $8,616,000 in fees and expenses in connection with the issuance of
the 7% Convertible Notes, which is included in deferred financing costs.
(l) In December 1998, the Company issued $600,000,000 aggregate
principal amount of 7% Convertible Subordinated Notes due 2008. Interest is
payable semiannually on June 15 and December 15 of each year, commencing
June 15, 1999. The New Convertible Notes mature on December 15, 2008. The
New Convertible Notes are unsecured obligations convertible into shares of
common stock prior to maturity at a conversion price of $61.25 per share,
subject to adjustment. There are approximately 9,796,000 shares of common
stock reserved for issuance upon conversion of the New Convertible Notes.
The New Convertible Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after December 15, 2001, at a
redemption price of 104.375% that declines
F-17
<PAGE> 272
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
annually to 100% in 2006, in each case together with accrued and unpaid
interest to the redemption date. The Company incurred $16,729,000 in fees
and expenses in connection with the issuance of the New Convertible Notes
which is included in deferred financing costs.
(m) NTL Bermuda has assumed the obligations of Partners' $517.3
million principal amount at maturity, 11.2% Debentures. Interest accretes
on the 11.2% Debentures at 11.2% per annum compounded semi-annually from
November 15, 1995 to November 15, 2000, after which date interest will be
paid in cash on each May 15 and November 15 through November 15, 2007. In
1998, the Company recognized $7,674,000 of the original issue discount as
interest expense.
(n) Other includes notes payable by NTL Bermuda to Comcast U.K.
Holdings, Inc. (an affiliate of a shareholder of the Company) of
$20,428,000 and other obligations of subsidiaries of NTL Bermuda of
$11,411,000. The notes payable accrue interest at 9% and are due in
September 1999.
The indentures governing the notes issued by the Company and the 11.2%
Debentures contain restrictions relating to, among other things: (i) incurrence
of additional indebtedness and issuance of preferred stock, (ii) dividend and
other payment restrictions and (iii) mergers, consolidations and sales of
assets.
In connection with the ComTel acquisition, the Company borrowed an
aggregate of L475 million under its credit facility from The Chase Manhattan
Bank. In November 1998, the Company received net proceeds of $849 million from
the issuance of the 11 1/2% Notes and the 12 3/8% Notes, a substantial portion
of which was used to repay the $799 million outstanding under the bank loan. The
Company recorded an extraordinary loss from the early extinguishment of the bank
loan of $18,579,000 in 1998.
The Company required consents from the holders of some of its notes to
modify certain indenture provisions in order to proceed with the Partners
acquisition. In October 1998, the Company paid $11,333,000 in consent payments
and issued warrants to purchase 766,000 shares of common stock in lieu of
additional consent payments of $10,080,000. In 1996, pursuant to the terms of
the consent solicitations to the holders of the 10 7/8% Notes and to the holders
of the 12 3/4% Notes to gain consent to modify certain indenture provisions, the
Company paid an aggregate of $3,592,000 in consent payments and issued warrants
to purchase 164,000 shares of common stock in lieu of additional consent
payments of $1,641,000.
The 11.2% Debentures restrict the payment of cash dividends and loans from
NTL Bermuda to the Company. At December 31, 1998, restricted net assets of NTL
Bermuda were approximately $587 million.
Long-term debt repayments are due as follows:
<TABLE>
<S> <C>
Year ended December 31:
1999......................................... $ 23,691,000
2000.................................... 1,539,000
2001.................................... 1,261,000
2002.................................... 1,090,000
2003.................................... 999,000
Thereafter.............................. 5,038,914,000
--------------
$5,067,494,000
==============
</TABLE>
10. REDEEMABLE PREFERRED STOCK
In February 1997, the Company issued $100,000,000 of its 13% Senior
Redeemable Exchangeable Preferred Stock (the "Redeemable Preferred Stock"). The
Company received net proceeds of $96,625,000
F-18
<PAGE> 273
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
after discounts and commissions from the issuance of the Redeemable Preferred
Stock. Discounts, commissions and other fees incurred of $3,729,000 were
recorded as unamortized discount at issuance.
Of the 2,500,000 authorized shares of Series Preferred Stock, 100,000
shares of Redeemable Preferred Stock were issued. Dividends accrue at 13% per
annum ($130 per share) and are payable quarterly in arrears as of May 15, 1997.
Dividends, whether or not earned or declared, will accrue without interest until
declared and paid, which declaration may be for all or part of the accrued
dividends. Dividends accruing on or prior to February 15, 2004 may, at the
option of the Company, be paid in cash, by the issuance of additional Redeemable
Preferred Stock or in any combination of the foregoing. As of December 31, 1998,
the Company has accrued $27,260,000 for dividends and has issued approximately
25,000 shares for $25,225,000 of such accrued dividends. The Redeemable
Preferred Stock may be redeemed, at the Company's option, in whole or in part,
at any time on or after February 15, 2002 at a redemption price of 106.5% of the
liquidation preference of $1,000 per share that declines annually to 100% in
2005, in each case together with accrued and unpaid dividends to the redemption
date. The Redeemable Preferred Stock is subject to mandatory redemption on
February 15, 2009. On any scheduled dividend payment date, the Company may, at
its option, exchange all of the shares of Redeemable Preferred Stock then
outstanding for the Company's 13% Subordinated Exchange Debentures due 2009 (the
"Subordinated Debentures").
The Subordinated Debentures, if issued, will bear interest at a rate of 13%
per annum, payable semiannually in arrears on February 15 and August 15 of each
year commencing with the first such date to occur after the date of exchange.
Interest accruing on or prior to February 15, 2004 may, at the option of the
Company, be paid in cash, by the issuance of additional Subordinated Debentures
or in any combination of the foregoing. The Subordinated Debentures will be
redeemable, at the Company's option, in whole or in part, on or after February
15, 2002 at a redemption price of 106.5% that declines annually to 100% in 2005,
in each case together with accrued and unpaid interest to the redemption date.
11. NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES
Nonrecurring charges of $20,642,000 in 1997 include deferred costs
written-off of $5,013,000 and restructuring costs of $15,629,000. The deferred
costs written-off arose in connection with the Company's unsuccessful bid for
United Kingdom digital terrestrial television multiplex licenses. Restructuring
costs relate to the Company's announcement in September 1997 of a reorganization
of certain of its operations. This charge consisted of employee severance and
related costs of $6,726,000 for approximately 280 employees to be terminated,
lease exit costs of $6,539,000 and penalties of $2,364,000 associated with the
cancellation of contractual obligations. As of December 31, 1998, $9,172,000 of
the provision has been used, including $5,558,000 for severance and related
costs, $1,450,000 for lease exit costs and $2,164,000 for penalties associated
with the cancellation of contractual obligations. As of December 31, 1998, 177
employees had been terminated. The $4,194,000 reversed in 1998 from changes in
estimates of costs to be incurred includes $1,168,000 for severance and related
costs, $2,826,000 for lease exit costs and $200,000 for penalties associated
with the cancellation of contractual obligations. This reversal was necessary
because employees whose positions were eliminated chose to remain with the
Company in other positions rather than leave the Company and receive severance
pay; and the real estate markets in which the Company sublet space improved
increasing the sublet rentals and shortening the period of time required to find
sub tenants. The remaining restructuring reserve of $2,263,000 is for lease
costs net of sublease revenue.
12. OTHER GAINS
Other gains of $21,497,000 in 1997 include a legal settlement of
$10,000,000 and a gain on the sale of fixed assets of $11,497,000. In October
1997, following the U.S. District Court's decision to dismiss the Company's
complaint against LeGroupe Videotron Ltee and its subsidiary, the Company
entered into a
F-19
<PAGE> 274
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Settlement Agreement dismissing the Company's complaint in exchange for a
payment of $10,000,000. In December 1997, a U.S. subsidiary of the Company sold
its fixed and other assets utilized in its microwave transmission service
business and recognized a gain of $11,497,000.
13. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
----------- ------------ ----------
<S> <C> <C> <C>
Current:
Federal..................................... $ -- $ -- $ --
State and local........................... -- 1,261,000 344,000
Foreign................................... -- -- 2,246,000
----------- ------------ ----------
Total current............................... -- 1,261,000 2,590,000
----------- ------------ ----------
Deferred:
Federal................................... -- -- --
State and local........................... -- -- --
Foreign................................... (3,327,000) (16,852,000) 5,063,000
----------- ------------ ----------
Total deferred.............................. (3,327,000) (16,852,000) 5,063,000
----------- ------------ ----------
$(3,327,000) $(15,591,000) $7,653,000
=========== ============ ==========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets.......................................... $ 68,766,000 $ 68,380,000
Other............................................... 6,598,000 4,894,000
------------- -------------
Total deferred tax liabilities........................ 75,364,000 73,274,000
Deferred tax assets:
Net operating losses................................ 244,394,000 107,208,000
Net deferred interest expense....................... 113,993,000 94,689,000
Depreciation and amortization....................... 107,378,000 16,935,000
Other............................................... 19,975,000 18,164,000
------------- -------------
Total deferred tax assets............................. 485,740,000 236,996,000
Valuation allowance for deferred tax assets........... (477,438,000) (233,940,000)
------------- -------------
Net deferred tax assets............................... 8,302,000 3,056,000
------------- -------------
Net deferred tax liabilities.......................... $ 67,062,000 $ 70,218,000
============= =============
</TABLE>
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $280,000,000 for U.S. federal income tax purposes that expire in
varying amounts commencing in 2009. The Company also has United Kingdom net
operating loss carryforwards of approximately $470,000,000 which
F-20
<PAGE> 275
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
have no expiration date. Pursuant to United Kingdom law, these losses are only
available to offset income of the separate entity that generated the loss.
The Company is currently undergoing a U.S. federal income tax audit. The
Internal Revenue Service has issued notices of proposed adjustment. The Company
does not expect that the audit adjustments, if any, will have a material adverse
effect on its financial position, results of operations or cash flows.
The reconciliation of income taxes computed at U.S. federal statutory rates
to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
Provision (benefit) at federal statutory
rate (35%)............................ $(188,309,000) $(120,452,000) $(90,518,000)
Add (deduct):
State and local income tax, net of
federal benefit.................... -- 820,000 224,000
Foreign losses with no benefit........ 83,500,000 59,804,000 44,610,000
Amortization of goodwill and license
acquisition costs.................. 4,366,000 3,925,000 4,031,000
U.S. losses with no benefit........... 97,116,000 40,312,000 49,184,000
Other................................. -- -- 122,000
------------- ------------- ------------
$ (3,327,000) $ (15,591,000) $ 7,653,000
============= ============= ============
</TABLE>
14. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
consolidated balance sheets approximate fair value.
Long-term debt: The fair values of the Company's debt are based on
the quoted market prices.
Redeemable Preferred Stock: The fair value is based on the quoted
market price.
F-21
<PAGE> 276
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
---------------------------- --------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents........... $736,265,000 $736,265,000 $98,902,000 $98,902,000
Long-term debt:
10 7/8% Notes..................... -- -- 194,959,000 199,810,000
12 3/4% Notes..................... 236,935,000 252,801,000 209,387,000 230,577,000
11 1/2% Series B Notes............ 831,976,000 882,000,000 743,961,000 819,000,000
10% Notes......................... 400,000,000 408,000,000 400,000,000 422,000,000
Sterling Senior Notes............. 206,800,000 192,917,000 -- --
Sterling Deferred Coupon Notes.... 317,511,000 293,732,000 -- --
9 3/4% Notes...................... 865,880,000 835,250,000 -- --
11 1/2% Notes..................... 625,000,000 681,250,000 -- --
12 3/8% Notes..................... 254,718,000 274,500,000 -- --
7 1/4% Convertible Notes.......... -- -- 191,750,000 212,843,000
7% Convertible Notes.............. 275,000,000 411,125,000 275,000,000 264,688,000
New Convertible Notes............. 600,000,000 656,340,000 -- --
11.2% Debentures.................. 421,835,000 437,119,000 -- --
Redeemable Preferred Stock........ 124,127,000 124,127,000 108,534,000 121,846,000
</TABLE>
15. RELATED PARTY TRANSACTIONS
On July 25, 1990, Cellular Communications, Inc. ("CCI") and AirTouch
Communications, Inc. ("AirTouch") entered into a Merger and Joint Venture
Agreement, as amended as of December 14, 1990. In connection with this
agreement, on July 31, 1991, CCI distributed to its shareholders the stock of
the Company.
Through August 1996, CCI provided management, financial and legal services
to the Company. Amounts charged to the Company included direct costs where
identifiable, and indirect costs allocated utilizing direct labor hours as
reported by the common officers and employees of CCI and the Company. For the
year ended December 31, 1996, CCI charged $1,194,000 which is included in
corporate expenses. In August 1996, upon the merger of CCI with AirTouch, the
Company commenced providing management, financial, legal and technical services
to Cellular Communications International, Inc. ("CCII") and Cellular
Communications of Puerto Rico, Inc. (formerly CoreComm Incorporated) ("CCPR").
In 1996, the Company charged CCII and CCPR $351,000 and $200,000, respectively,
which included direct costs where identifiable and allocated corporate overhead
based upon the amount of time incurred on CCII and CCPR business by the common
officers and employees of the Company, CCII and CCPR. These charges reduced
corporate expenses in 1996.
In January 1997, the Company, CCPR and CCII agreed to a change in the
Company's fee for the provision of services. In 1997, the Company charged CCPR
and CCII $1,492,000 and $871,000, respectively, for direct costs where
identifiable and a fixed percentage of its corporate overhead. In 1998, the
Company charged CCPR, CCII and CoreComm Limited (which was formed in 1998 and
has certain common officers and directors with the Company) $1,148,000, $982,000
and $313,000, respectively, for direct costs where identifiable and a fixed
percentage of its corporate overhead. These charges reduced corporate expenses.
In the opinion of management of the Company, the allocation methods are
reasonable.
F-22
<PAGE> 277
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998 and 1997, the Company had receivables of none and
$69,000 from CCII, $588,000 and $71,000 from CCPR and $1,038,000 and none from
CoreComm Limited, respectively.
16. NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Numerator:
Loss before extraordinary item................. $(503,927,000) $(328,557,000) $(254,454,000)
Preferred stock dividend....................... (18,761,000) (11,978,000) --
------------- ------------- -------------
(522,688,000) (340,535,000) (254,454,000)
Extraordinary item............................. (30,689,000) (4,500,000) --
------------- ------------- -------------
Loss available to common shareholders.......... $(553,377,000) $(345,035,000) $(254,454,000)
------------- ------------- -------------
Denominator for basic net loss per common
share........................................ 41,202,000 32,117,000 31,041,000
Effect of dilutive securities.................. -- -- --
------------- ------------- -------------
Denominator for diluted net loss per common
share........................................ 41,202,000 32,117,000 31,041,000
------------- ------------- -------------
Basic and diluted net loss per common share:
Loss before extraordinary item............... $ (12.69) $ (10.60) $ (8.20)
Extraordinary item........................... (.74) (.14) --
------------- ------------- -------------
Net loss..................................... $ (13.43) $ (10.74) $ (8.20)
============= ============= =============
</TABLE>
Stock options, warrants and convertible securities are excluded from the
calculation of net loss per common share as their effect would be antidilutive.
17. SHAREHOLDERS' EQUITY (DEFICIENCY)
Series Preferred Stock
In September 1998, the Company issued 125,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series A (the "Series A Preferred
Stock") in connection with the ComTel acquisition. Each share of Series A
Preferred Stock has a stated value of $1,000. Cumulative dividends accrue at
9.9% of the stated value per share. Dividends are payable when and if declared
by the Board of Directors and may be paid, in the sole discretion of the Board,
in cash, in shares of common stock, in shares of Convertible Preferred Stock or
through any combination of the foregoing. As of December 31, 1998, accrued and
unpaid dividends were $3,480,000. On December 22, 1999, all outstanding shares
of the Series A Preferred Stock shall be redeemed for $1,000 per share together
with accrued and unpaid dividends, at the Company's option, in cash, in shares
of common stock, in shares of Convertible Preferred Stock or through any
combination of the foregoing.
In December 1998, the Company issued 52,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series B (the "Series B Preferred
Stock") in connection with the EGT acquisition. Each share of Series B Preferred
Stock has a stated value of $1,000. Cumulative dividends accrue at 9.9% of the
stated value per share. Dividends are payable when and if declared by the Board
of Directors and may be paid, in the sole discretion of the Board, in cash, in
shares of common stock, or through a combination of the foregoing. The Series B
Preferred Stock may be redeemed, at the Company's option, any time at a price
equal to $1,000 per share, together with accrued and unpaid dividends to the
redemption date. On July 1,
F-23
<PAGE> 278
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000 all outstanding shares of Series B Preferred Stock shall be redeemed for
$1,000 per share together with accrued and unpaid dividends, at the Company's
option, in cash, in shares of common stock, or through a combination of the
foregoing.
As of December 31, 1998, the Series A Preferred Stock and the Series B
Preferred Stock would have been redeemable into an aggregate of 3,140,000 shares
of the Company's common stock.
In October 1996, 780 shares of Non-Voting Convertible Preferred Stock,
Series A ("Convertible Preferred Stock") were issued in connection with the
CableTel Newport acquisition. In May 1998, the 780 outstanding shares of
Convertible Preferred Stock were converted into 1,950,000 shares of Common
Stock.
Warrants
The Company has the following warrants outstanding as of December 31, 1998:
(i) warrants to purchase an aggregate of 756,000 shares of common stock at $5.57
per share issued in 1993 that expire in 2000 (899,000 were originally issued),
(ii) warrants to purchase an aggregate of 158,000 shares of common stock at
$23.78 per share issued in 1996 that expire in 2006 (164,000 were originally
issued) and (iii) warrants to purchase an aggregate of 766,000 shares of common
stock at $43.39 per share issued in 1998 that expire in 2008 (766,000 were
originally issued).
Shareholder Rights Plan
The Rights Agreement provides that one Right will be issued with each share
of common stock issued on or after October 13, 1993. The Rights are exercisable
upon the occurrence of certain potential takeover events and will expire in
October 2003 unless previously redeemed by the Company. When exercisable, each
Right entitles the owner to purchase from the Company one one-hundredth of a
share of Series A Junior Participating Preferred Stock ("Rights Preferred
Stock") at a purchase price of $100.
The Rights Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share and will be entitled to an
aggregate dividend of 100 times the dividend, if any, declared per share of
common stock. In the event of liquidation, the holders of Rights Preferred Stock
will be entitled to a minimum preferential liquidation payment of $1 per share
and will be entitled to an aggregate payment of 100 times the payment made per
share of common stock. Each share of Rights Preferred Stock will have 100 votes
and will vote together with the common stock. In the event of any merger,
consolidation or other transaction in which shares of common stock are changed
or exchanged, each share of Rights Preferred Stock will be entitled to receive
100 times the amount received per share of common stock. The Rights are
protected by customary antidilution provisions.
There are 2,500,000 authorized shares of Series Preferred Stock of which
1,000,000 shares are designated Rights Preferred Stock.
Stock Options
There are 2,164,000 shares of common stock reserved for issuance under the
OCOM Corporation (a wholly-owned subsidiary of the Company) 1991 Stock Option
Plan. The plan provides that incentive stock options ("ISOs") be granted at the
fair market value of OCOM's common stock on the date of grant, and nonqualified
stock options ("NQSOs") be granted at not less than 85% of the fair market value
of OCOM's common stock on the date of grant. Options are exercisable as to 20%
of the shares subject thereto on the date of grant and become exercisable as to
an additional 20% of the shares subject thereto on each January 1 thereafter,
while the optionee remains an employee of the Company. Options will expire ten
years after the date of the grant.
F-24
<PAGE> 279
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are 6,653,000 shares of common stock reserved for issuance under the
NTL Incorporated 1993 Stock Option Plan. The exercise price of an ISO may not be
less than 100% of the fair market value of the Company's common stock on the
date of grant, and the exercise price of a NQSO may not be less than 85% of the
fair market value of the Company's common stock on the date of grant. Options
are exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on each
January 1 thereafter, while the optionee remains an employee of the Company.
Options will expire ten years after the date of the grant.
There are 100,000 shares of common stock reserved for issuance under the
OCOM Corporation Non-Employee Director Stock Option Plan. The plan provides that
all options be granted at the fair market value of OCOM's common stock on the
date of grant, and options will expire ten years after the date of the grant.
Options are exercisable as to 20% of the shares subject thereto on the date of
grant and become exercisable as to an additional 20% of the shares subject
thereto on each subsequent anniversary of the grant date, while the optionee
remains a director of the Company. Options will expire ten years after the date
of the grant.
There are 320,000 shares of common stock reserved for issuance under the
NTL Incorporated 1993 Non-Employee Director Stock Option Plan. Under the terms
of this plan, options will be granted to members of the Board of Directors who
are not employees of the Company or any of its affiliates. The plan provides
that all options be granted at the fair market value of the Company's common
stock on the date of grant, and options will expire ten years after the date of
the grant. Options are exercisable as to 20% of the shares subject thereto on
the date of grant and become exercisable as to an additional 20% of the shares
subject thereto on each subsequent anniversary of the grant date while the
optionee remains a director of the Company. Options will expire ten years after
the date of the grant.
There are 15,000,000 shares of common stock reserved for issuance under the
1998 Non-Qualified Stock Option Plan. The exercise price of a NQSO shall be
determined by the Compensation and Option Committee. Options are exercisable as
to 20% of the shares subject thereto on the date of grant and become exercisable
as to an additional 20% of the shares subject thereto on each January 1
thereafter, while the optionee remains an employee of the Company. Options will
expire ten years after the date of the grant.
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996: risk-free interest rates of 5.02%, 5.89%
and 6.56%, respectively, dividend yield of 0%, volatility factor of the expected
market price of the Company's common stock of .331, .276 and .255, respectively,
and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
F-25
<PAGE> 280
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Following is
the Company's pro forma information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Pro forma net (loss)................... $(580,747,000) $(343,850,000) $(261,245,000)
Basic and diluted pro forma net (loss)
per share.............................. $ (14.55) $ (11.08) $ (8.42)
</TABLE>
A summary of the Company's stock option activity and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of year....... 8,157,000 $15.98 6,738,000 $14.10 5,934,000 $11.04
Granted................................ 8,864,000 37.59 1,571,000 23.97 1,390,000 25.94
Exercised.............................. (298,000) 21.24 (119,000) 12.85 (396,000) 3.44
Forfeited.............................. (275,000) 46.47 (33,000) 23.78 (190,000) 27.39
---------- ------ --------- ------ --------- ------
Outstanding -- end of year............. 16,448,000 $27.02 8,157,000 $15.98 6,738,000 $14.10
========== ====== ========= ====== ========= ======
Exercisable at end of year............. 7,046,000 $16.55 5,663,000 $12.39 4,258,000 $10.71
========== ====== ========= ====== ========= ======
</TABLE>
Weighted-average fair value of options, calculated using the Black-Scholes
option pricing model, granted during 1998, 1997 and 1996 is $20.54, $12.74 and
$13.98, respectively.
The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
-------------------------------------------------- ----------------------------
RANGE OF EXERCISE NUMBER OF WEIGHTED-REMAINING WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
PRICES OPTIONS CONTRACTUAL LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- ----------------- ---------- ------------------ ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.18 to $ 0.56 77,000 2.6 Years $ 0.245 77,000 $ 0.245
$ 0.70 to $ 1.12 150,000 2.6 Years $ 0.745 150,000 $ 0.745
$ 1.53 to $ 2.69 355,000 2.5 Years $ 2.157 355,000 $ 2.157
$ 3.00 to $ 4.50 47,000 3.5 Years $ 3.230 47,000 $ 3.230
$ 8.00 to $14.70 3,289,000 4.4 Years $ 8.833 3,289,000 $ 8.833
$15.00 to $22.88 1,390,000 6.4 Years $21.704 1,087,000 $21.671
$23.00 to $33.25 2,676,000 8.0 Years $25.581 1,399,000 $26.088
$36.50 to $45.00 8,192,000 9.2 Years $36.912 591,000 $40.485
$46.00 to $55.69 272,000 9.9 Years $49.014 51,000 $49.202
---------- --------- ------- --------- -------
Total 16,448,000 7,046,000
========== =========
</TABLE>
As of December 31,1998, the Company has 38,325,000 shares of its common
stock reserved for issuance upon the exercise of warrants and stock options and
the conversion of debt and preferred stock.
F-26
<PAGE> 281
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. EMPLOYEE BENEFIT PLANS
Certain subsidiaries of NTL Group Limited operate a defined benefit pension
plan in the United Kingdom. The assets of the Plan are held separately from
those of NTL Group Limited and are invested in specialized portfolios under the
management of an investment group. The pension cost is calculated using the
attained age method. The Company's policy is to fund amounts to the defined
benefit plan necessary to comply with the funding requirements as prescribed by
the laws and regulations in the United Kingdom.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year..................... $202,645 $157,002
Service cost................................................ 13,365 10,693
Interest cost............................................... 14,684 12,765
Actuarial losses/(gains).................................... (14,640) 26,732
Foreign currency exchange rate changes...................... 2,363 --
Benefits paid............................................... (4,968) (4,547)
-------- --------
Benefit obligation at end of year........................... $213,449 $202,645
======== ========
Change in plan assets
Fair value of plan assets at beginning of year.............. $193,607 $158,965
Actual return on plan assets................................ 24,144 30,852
Foreign currency exchange rate changes...................... 2,257 --
Company contributions....................................... 10,233 8,905
Benefits paid............................................... (4,968) (4,547)
Other....................................................... -- (568)
-------- --------
Fair value of plan assets at end of year.................... $225,273 $193,607
======== ========
Funded status of the plan (underfunded)..................... $ 11,824 $ (9,038)
Unrecognized net actuarial losses/(gains)................... (23,060) (1,057)
Unrecognized transition obligation.......................... 9,306 10,118
-------- --------
Prepaid/(accrued)benefit cost............................... $ (1,930) $ 23
======== ========
Actuarial assumptions:
Weighted average discount rate............................ 5.75% 7.25%
Weighted average rate of compensation increase............ 5.50% 8.00%
Expected long-term rate of return on plan assets.......... 8.00% 9.00%
</TABLE>
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.............................. $ 13,365,000 $ 10,693,000 $ 7,997,000
Interest cost............................. 14,684,000 12,765,000 11,679,000
Actual return on plan assets.............. (24,144,000) (30,852,000) (16,103,000)
Net amortization and deferral............. 8,282,000 17,327,000 4,241,000
------------ ------------ ------------
$ 12,187,000 $ 9,933,000 $ 7,814,000
============ ============ ============
</TABLE>
F-27
<PAGE> 282
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. LEASES
Leases for buildings, office space and equipment extend through 2031. Total
rental expense for the years ended December 31, 1998, 1997 and 1996 under
operating leases was $29,356,000, $20,674,000 and $14,886,000, respectively.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
------------
<S> <C>
Year ended December 31:
1999........................................... $ 33,730,000
2000...................................... 35,499,000
36,658,000
2001...................................... --
2002...................................... 33,231,000
2003...................................... 22,048,000
Thereafter................................ 287,797,000
------------
$448,963,000
============
</TABLE>
20. COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 1998, the Company was committed to pay approximately
$264,000,000 for equipment and services.
The Company has various licenses for its cable television, telephone and
telecommunications business, and for its transmission and distribution services.
The Company's license fees in 1998 were $5,924,000.
Pursuant to the terms of the Company's local delivery operator license
("LDL") for Northern Ireland, a subsidiary of the Company is required to make
annual cash payments to the ITC for 15 years in the amount of approximately
L15.4 million (subject to adjustment for inflation). This is in addition to the
percentages of qualifying revenue payments of 0% for the first ten years and 2%
for the last five years of the LDL.
In December 1998, a wholly-owned subsidiary of the Company acquired 9
million shares, representing 6.3% of the issued share capital, of Newcastle
United PLC (the Newcastle United football club) for cash of approximately $17
million. In conjunction with the sale of shares, the seller entered into an
irrevocable commitment to the Company that if the Company makes an offer for all
of the issued share capital of Newcastle United, it will accept that offer in
respect of the remaining balance of its shares. The seller would sell Newcastle
United shares representing 50.8% of the issued share capital at a price of 111.7
pence per share in cash, or at the Company's option, in a zero coupon note.
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business. None of these matters
are expected to have a material adverse effect on the Company's financial
position, results of operations or cash flows.
21. INDUSTRY SEGMENTS
The Company has four reportable segments: Local Telecoms and Television,
National Telecoms, Broadcast and Corporate and Other. The Local Telecoms and
Television segment delivers residential telephony and cable television services
in regional franchise areas in the United Kingdom. The National
F-28
<PAGE> 283
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Telecoms segment includes the Company's national business telecoms, national and
international carrier telecoms, radio communications, satellite services and
national internet services business units. The Broadcast segment provides
television and radio broadcasters with broadcast transmission services from
owned and shared tower sites throughout the United Kingdom. Corporate and other
includes the Company's shared services departments in the United Kingdom and
OCOM, a subsidiary that operated long distance and microwave transmission
businesses in the United States until June 1998.
The accounting policies of the segments are the same as those described in
the Summary of Significant Accounting Policies. The Company's management
evaluates segment performance based on various financial and non-financial
measurements. The results of operations data utilized in financial measurements
are revenues and EBITDA, which is revenues less operating and selling, general
and administrative expenses. Certain selling, general and administrative
expenses are allocated to segments based on revenues. Segment assets include
only those assets that are specific to the segment. Management does not allocate
shared services departments and jointly used assets for purposes of measuring
segment performance.
The reportable segments are strategic business units that offer different
services. They are managed separately because each business requires different
technology and marketing strategies.
<TABLE>
<CAPTION>
LOCAL
TELECOMS CORPORATE
AND NATIONAL AND
BROADCAST TELEVISION TELECOMS OTHER TOTAL
--------- ---------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Revenues........................ $140,156 $ 355,589 $248,895 $ 2,375 $ 747,015
Depreciation and amortization... 29,974 143,479 29,476 63,183 266,112
EBITDA (1)...................... 91,687 67,587 35,848 (119,735) 75,387
Expenditures for long-lived
assets........................ 88,476 413,917 297,745 67,141 867,279
Total assets.......... 289,068 3,100,492 761,097 2,043,440 6,194,097
YEAR ENDED DECEMBER 31, 1997
Revenues........................ $130,799 $ 166,951 $185,194 $ 8,831 $ 491,775
Depreciation and amortization... 13,584 78,730 9,666 48,529 150,509
EBITDA (1)...................... 73,636 18,693 13,522 (84,853) 20,998
Expenditures for long-lived
assets........................ 36,142 304,656 105,076 20,519 466,393
Total assets.......... 230,920 1,323,808 220,318 646,593 2,421,639
YEAR ENDED DECEMBER 31, 1996
Revenues........................ $ 83,618 $ 89,209 $ 45,430 $ 10,086 $ 228,343
Depreciation and amortization... 6,752 51,014 3,704 37,183 98,653
EBITDA (1)...................... 49,684 (52,215) 10,800 (39,233) (30,964)
Expenditures for long-lived
assets........................ 29,195 505,345 29,224 24,311 588,075
Total assets.......... 220,077 1,184,156 98,912 951,466 2,454,611
</TABLE>
- ---------------
(1) Represents earnings before interest, taxes, depreciation and amortization,
corporate expenses, franchise fees, nonrecurring charges, other gains,
minority interest and extraordinary items.
F-29
<PAGE> 284
NTL COMMUNICATIONS CORP. (FORMERLY
NTL INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of segment combined EBITDA to loss before income taxes,
minority interest and extraordinary item is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Segment Combined EBITDA.......................... $ 75,387 $ 20,998 $ (30,964)
(Add) Deduct:
Franchise fees................................. 25,036 23,587 13,117
Corporate expenses............................. 17,048 18,324 14,899
Nonrecurring charges........................... (4,194) 20,642 --
Depreciation and amortization.................. 266,112 150,509 98,653
Interest and other income...................... (46,024) (49,912) (33,634)
Interest expense............................... 328,815 202,570 137,032
Foreign currency transaction gains............. (4,152) (574) (2,408)
--------- --------- ---------
582,641 365,146 227,659
--------- --------- ---------
Loss before income taxes, minority interest
and extraordinary item.................... $(507,254) $(344,148) $(258,623)
========= ========= =========
</TABLE>
22. GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
UNITED STATES UNITED KINGDOM
------------- --------------
(IN THOUSANDS)
<S> <C> <C>
1998
Revenues................................................. $ 2,375 $ 744,640
Long-lived assets........................................ 137,223 4,852,374
1997
Revenues................................................. 8,831 482,944
Long-lived assets........................................ 55,173 2,129,312
1996
Revenues................................................. 10,086 218,257
Long-lived assets........................................ 56,881 1,856,689
</TABLE>
23. SUBSEQUENT EVENTS
In January 1999, the Company received $500 million in cash from Microsoft
Corp. in exchange for 500,000 shares of the Company's 5.25% Convertible
Preferred Stock, Series A and warrants to purchase 1,200,000 shares of the
Company's common stock at an exercise price of $84 per share. The preferred
stock is convertible into common stock at a conversion price of $100 per share.
The preferred stock is redeemable 10 years from the date of issuance in cash or
shares of common stock. The preferred stock may be redeemed by the Company on
the earlier of seven years or the date on which the Company's common stock has
traded above $120 per share for 25 consecutive trading days. Dividends are
payable at the Company's option in cash, common stock or additional shares of
preferred stock. The warrants expire in 2004.
In March 1999, the Commonwealth of Australia accepted the Company's bid to
own and operate the Australian National Transmission Network ("NTN"). NTN
operates from over 560 tower sites and provides exclusive television and radio
transmission services to Australia's only national TV and radio broadcasters,
serves regional and community TV and radio broadcasters, and provides equipment
hosting services to telecom operators and emergency service communications
providers on its towers. A subsidiary of the Company will purchase the company
that will hold the NTN assets for an aggregate purchase price of approximately
$407 million.
F-30
<PAGE> 285
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 572,387
Marketable securities..................................... 90,531
Accounts receivable -- trade, less allowance for doubtful
accounts of $69,757.................................... 281,879
Other..................................................... 58,624
----------
TOTAL CURRENT ASSETS........................................ 1,003,421
FIXED ASSETS, NET........................................... 5,229,317
Intangible assets, net...................................... 2,600,069
Investment in Cable London PLC, net of accumulated
amortization of $16,879................................... 207,038
Other assets, net of accumulated amortization of $43,882.... 328,838
----------
TOTAL ASSETS................................................ $9,368,683
==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 227,410
Accrued expenses and other................................ 324,363
Accrued construction costs................................ 82,443
Interest payable.......................................... 27,077
Deferred revenue.......................................... 150,504
Current portion of long-term debt......................... 114,976
----------
TOTAL CURRENT LIABILITIES................................... 926,773
Long-term debt.............................................. 7,482,814
Deferred income taxes....................................... 84,087
Commitments and contingent liabilities
SHAREHOLDER'S EQUITY (DEFICIENCY):
Common stock -- $.01 par value; authorized, issued and
outstanding 100........................................ --
Additional paid-in capital................................ 2,894,190
Accumulated other comprehensive income.................... 97,375
(Deficit)................................................. (2,116,556)
----------
875,009
----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)..... $9,368,683
==========
</TABLE>
See accompanying notes.
F-31
<PAGE> 286
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------
1999 1998
---------- ---------
<S> <C> <C>
REVENUES
Local telecommunications and television..................... $ 583,728 $ 214,545
National and international telecommunications............. 349,232 166,845
Broadcast transmission and other.......................... 119,900 100,825
Other telecommunications.................................. -- 2,375
---------- ---------
1,052,860 484,590
COSTS AND EXPENSES
Operating expenses........................................ 507,335 243,476
Selling, general and administrative expenses.............. 416,077 192,070
Franchise fees............................................ 22,287 18,729
Corporate expenses........................................ 18,475 11,797
Depreciation and amortization............................. 518,356 156,785
---------- ---------
1,482,530 622,857
---------- ---------
OPERATING (LOSS)............................................ (429,670) (138,267)
OTHER INCOME (EXPENSE)
Interest and other income................................. 26,829 39,796
Interest expense.......................................... (484,570) (226,422)
Foreign currency transaction gains (losses)............... 22,523 (6,973)
---------- ---------
(LOSS) BEFORE EXTRAORDINARY ITEM............................ (864,888) (331,866)
(LOSS) FROM EARLY EXTINGUISHMENT OF DEBT.................... -- (4,239)
---------- ---------
NET (LOSS).................................................. $ (864,888) $(336,105)
========== =========
</TABLE>
See accompanying notes.
F-32
<PAGE> 287
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
SERIES A SERIES B SERIES A
PREFERRED PREFERRED PREFERRED COMMON STOCK
STOCK STOCK STOCK $.01 PAR VALUE ADDITIONAL
-------------- ------------- -------------- ----------------- PAID-IN
SHARES PAR SHARES PAR SHARES PAR SHARES PAR CAPITAL
-------- --- ------- --- -------- --- ---------- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998.......... 125,000 $ 2 52,000 $-- 60,249,000 $602 $1,501,561
Exercise of stock options........... 432,000 4 12,054
Exercise of warrants................ 15,000 1 102
Preferred stock issued for cash..... 500,000 $ 5 483,805
Warrants issued for cash............ 16,190
Accreted dividends on preferred
stock............................. 4,000 -- (8,644)
Accretion of discount on preferred
stock............................. (78)
Conversion of 7% Convertible
Subordinated Notes................ 1,000 -- 50
Common stock issued for
acquisition....................... 12,705,000 127 971,310
Issuance of stock options in
connection with an acquisition.... 6,599
Corporate restructuring............. (125,000) (2) (52,000) -- (504,000) (5) (73,402,000) (734) 405,604
Distribution to NTL Incorporated.... (500,000)
Contributions from NTL
Incorporated...................... 5,637
Comprehensive income:
Net loss for the nine months ended
September 30, 1999................
Currency translation adjustment.....
Total...........................
-------- --- ------- -- -------- --- ---------- ---- ----------
BALANCE, SEPTEMBER 30, 1999......... -- $-- -- $-- -- $-- -- -- $2,894,190
======== === ======= == ======== === ========== ==== ==========
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
LOSS INCOME (DEFICIT)
------------- ------------- -----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1998.......... $104,657 $(1,251,668)
Exercise of stock options...........
Exercise of warrants................
Preferred stock issued for cash.....
Warrants issued for cash............
Accreted dividends on preferred
stock.............................
Accretion of discount on preferred
stock.............................
Conversion of 7% Convertible
Subordinated Notes................
Common stock issued for
acquisition.......................
Issuance of stock options in
connection with an acquisition....
Corporate restructuring.............
Distribution to NTL Incorporated....
Contributions from NTL
Incorporated......................
Comprehensive income:
Net loss for the nine months ended
September 30, 1999................ $(864,888) $ (864,888)
Currency translation adjustment..... (7,282) (7,282)
---------
Total........................... $(872,170)
--------- -------- -----------
BALANCE, SEPTEMBER 30, 1999......... $ 97,375 $(2,116,556)
========= ======== ===========
</TABLE>
See accompanying notes.
F-33
<PAGE> 288
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities......... $ 20,304 $ (27,656)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired.......................... (473,816) (829,698)
Purchase of fixed assets.................................... (855,667) (464,944)
Increase in other assets.................................... (28,015) (10,397)
Proceeds from sale of assets................................ -- 1,312
Cash deposited into escrow for acquisition.................. (118,700) --
Purchase of marketable securities........................... (349,647) (297,918)
Proceeds from sales of marketable securities................ 527,218 168,650
----------- -----------
Net cash (used in) investing activities..................... (1,298,627) (1,432,995)
FINANCING ACTIVITIES
Distribution to NTL Incorporated............................ (500,000) --
Proceeds from borrowings, net of financing costs............ 1,125,494 2,093,602
Proceeds from issuance of preferred stock and warrants...... 500,000 --
Principal payments.......................................... (25,863) (66,040)
Cash deposited into escrow for debt repayment............... -- (221,427)
Proceeds from exercise of stock options and warrants........ 12,161 4,938
----------- -----------
Net cash provided by financing activities................... 1,111,792 1,811,073
Effect of exchange rate changes on cash..................... 2,653 10,119
----------- -----------
Increase (decrease) in cash and cash equivalents............ (163,878) 360,541
Cash and cash equivalents at beginning of period............ 736,265 98,902
----------- -----------
Cash and cash equivalents at end of period.................. $ 572,387 $ 459,443
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized....................................... $ 140,245 $ 79,112
Income taxes paid........................................... -- 335
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock...... $ 8,722 $ 11,820
Conversion of Convertible Notes, net of unamortized deferred
financing costs........................................... 269,285 187,012
Preferred stock issued for acquisition...................... -- 126,277
Common stock and stock options issued for an acquisition.... 978,036 --
</TABLE>
See accompanying notes.
F-34
<PAGE> 289
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine months
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. For further information,
refer to the Company's consolidated financial statements and footnotes thereto
included herein.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2001. The Company is evaluating the impact that the
adoption of SFAS No. 133 will have on its earnings and financial position.
In September 1999, NTL Incorporated declared a 5 for 4 stock split by way
of a stock dividend with respect to its common stock. The record date for this
dividend was October 4, 1999 and the payment date was October 7, 1999. All
common stock amounts in the Notes to Condensed Consolidated Financial Statements
have been adjusted to reflect the stock split.
2. CORPORATE RESTRUCTURING
Effective April 1, 1999, NTL Incorporated completed a corporate
restructuring to create a holding company structure. The formation of the
holding company is part of NTL Incorporated's effort to pursue opportunities
outside the United Kingdom and Ireland. The holding company restructuring was
accomplished through a merger so that all the stockholders of NTL Incorporated
at the effective time of the merger became stockholders of the new holding
company, and NTL Incorporated became a subsidiary of the new holding company.
The new holding company has taken the name NTL Incorporated and the holding
company's subsidiary simultaneously changed its name to NTL Communications Corp.
The "Company" refers to NTL Incorporated and subsidiaries up to and including
March 31, 1999, and to NTL Communications Corp. and subsidiaries beginning April
1, 1999. In addition, in April 1999, the Company distributed $500 million to NTL
Incorporated, principally to finance the acquisition of the Australian National
Transmission Network.
3. SALE OF PREFERRED STOCK AND WARRANTS
In January 1999, the Company received $500 million in cash from Microsoft
Corp. in exchange for 500,000 shares of the Company's 5.25% Convertible
Preferred Stock, Series A and warrants to purchase 1,500,000 shares of the
Company's common stock at an exercise price of $67.20 per share.
4. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------
(UNAUDITED, IN THOUSANDS)
<S> <C>
License acquisition costs, net of accumulated amortization
of $118,484............................................... $ 190,563
Goodwill, net of accumulated amortization of $129,938....... 2,290,678
Customer lists, net of accumulated amortization of
$21,765................................................... 118,828
----------
$2,600,069
==========
</TABLE>
F-35
<PAGE> 290
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
In July 1999, the Company acquired Cablelink Limited ("Cablelink"),
Ireland's largest cable television provider. Cablelink provides multi-channel
television and information services in Dublin, Galway and Waterford. Cablelink
holds licenses to provide analog and digital television services over cable and
microwave in its franchises, as well as a full service license to provide public
telephony, Internet and other value-added services throughout Ireland. The
Company acquired Cablelink for 535.18 million Irish punts (approximately $693
million), of which 455.18 million Irish punts ($589 million) was paid in cash
and the Company issued 80 million Irish punts ($104 million) principal amount
Variable Rate Redeemable Guaranteed Loan Notes due 2002.
Also in July 1999, the Company acquired certain broadband cable franchises
from British Telecommunications plc ("BT") for an aggregate of up to L19 million
($31.2 million). The Company paid approximately L5 million ($8.2 million) on
closing and will pay up to L14 million ($23.0 million) on completion of the
upgrade of certain networks. The Company expects to invest approximately L15
million ($24.7 million) to upgrade the networks for digital cable, interactive
services and high speed Internet access. The Company leases the networks from BT
on a long-term basis for an annual lease payment of approximately L3.9 million
($6.4 million).
These acquisitions were accounted for as purchases, and accordingly, the
net assets and results of operations have been included in the consolidated
financial statements from the dates of acquisition. The aggregate purchase price
of approximately $710 million, including costs incurred of $8.5 million,
exceeded the estimated fair value of net tangible assets acquired by $698
million, which is included in goodwill. Under the purchase method of accounting,
the purchase price is allocated to the assets acquired and liabilities assumed
based on the estimated fair values at acquisition. Changes to the allocation of
the purchase price are expected as valuations or appraisals of assets and
liabilities are completed.
In March 1999, the Company acquired Diamond Cable Communications plc
("Diamond"). The Company issued an aggregate of 15,938,000 shares of its common
stock in exchange for each ordinary share and deferred share of Diamond. The
Company's common stock was valued at $971,437,000, the fair value at the time of
the announcement. In addition, the Company issued options to purchase 153,000
shares of the Company's common stock to holders of Diamond options. The
Company's stock options were valued at $6,599,000. The Company incurred costs of
$8,080,000 in connection with the acquisition. The Company assumed Diamond's
debt including five different notes with an aggregate principal amount at
maturity of $1.6 billion. The acquisition was accounted for as a purchase, and
accordingly, the net assets and results of operations of Diamond have been
included in the consolidated financial statements from the date of acquisition.
The aggregate purchase price of $986 million plus the fair value of liabilities
assumed net of tangible assets acquired aggregated $1.3 billion, which was
allocated as follows: $78 million to customer lists, $85 million to license
acquisition costs and $1.16 billion to goodwill.
In 1998, the Company completed the acquisitions of ComTel Limited and
Telecential Communications, NTL (Bermuda) Limited ("NTL Bermuda") and Eastern
Group Telecoms.
The pro forma unaudited consolidated results of operations for the nine
months ended September 30, 1999 and 1998 assuming consummation of these
acquisitions as of January 1, 1998 are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------
1999 1998
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Total revenue............................................... $1,112,645 $ 831,241
(Loss) before extraordinary item............................ (956,886) (700,475)
Net (loss).................................................. (956,886) (704,714)
</TABLE>
F-36
<PAGE> 291
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
5. FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------
(UNAUDITED, IN THOUSANDS)
<S> <C>
Operating equipment......................................... $4,696,801
Other equipment............................................. 671,778
Construction-in-progress.................................... 606,530
----------
5,975,109
Accumulated depreciation.................................... (745,792)
----------
$5,229,317
==========
</TABLE>
6. INVESTMENT IN CABLE LONDON PLC
Pursuant to an agreement with Telewest Communications plc ("Telewest")
relating to NTL Bermuda's and Telewest's respective 50% ownership interests in
Cable London PLC ("Cable London"), in August 1999 Telewest exercised its right
to purchase all of NTL Bermuda's shares of Cable London for approximately L428
million (approximately $705 million) in cash. The closing of the sale of NTL
Bermuda's interest in Cable London is expected to take place in November 1999.
The sale of the Cable London interest is an "Asset Sale" for the purposes of the
Company's Indentures for certain of its notes. The Company will need to use an
amount equal to the proceeds from the sale to repay subsidiary debt, invest in
"Replacement Assets" or make an offer to redeem certain of its notes within 360
days after the sale.
F-37
<PAGE> 292
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1999
-------------------------
(UNAUDITED, IN THOUSANDS)
<S> <C>
NTL COMMUNICATIONS:
12 3/4% Senior Deferred Coupon Notes........................ $ 259,866
11 1/2% Senior Deferred Coupon Notes...................... 904,878
10% Senior Notes.......................................... 400,000
9 1/2% Senior Sterling Notes, less unamortized discount of
$592................................................... 205,208
10 3/4% Senior Deferred Coupon Sterling Notes............. 340,929
9 3/4% Senior Deferred Coupon Notes....................... 930,037
9 3/4% Senior Deferred Coupon Sterling Notes.............. 352,540
11 1/2% Senior Notes...................................... 625,000
12 3/8% Senior Deferred Coupon Notes...................... 278,356
7% Convertible Subordinated Notes......................... --
7% Convertible Subordinated Notes......................... 599,300
Senior Increasing Rate Notes.............................. 704,615
Variable Rate Redeemable Guaranteed Loan Notes............ 109,080
NTL BERMUDA:
11.2% Senior Discount Debentures.......................... 457,758
Other..................................................... 8,948
DIAMOND:
13 1/4% Senior Discount Notes............................. 285,223
11 3/4% Senior Discount Notes............................. 462,905
10 3/4% Senior Discount Notes............................. 328,165
10% Senior Sterling Notes................................. 222,264
9 1/8% Senior Notes....................................... 110,000
Other..................................................... 12,718
----------
7,597,790
Less current portion........................................ 114,976
----------
$7,482,814
==========
</TABLE>
(a) In September 1999, NTL Bermuda repaid at maturity the $21,529,000 due
under its notes payable to Comcast U.K. Holdings, Inc.
(b) In July 1999, the Company issued $704,615,000 principal amount Senior
Increasing Rate Notes due 2000 (the "Senior Notes") in connection with the
purchase of Cablelink. The principal amount includes $3,034,000 in fees which is
included in deferred financing costs. Interest on the Senior Notes is payable
quarterly at the higher of: (i) the Citibank, NA base rate plus 3%, (ii)
three-month LIBOR plus 3%, or (iii) the highest yield on any of the 1, 3, 5 and
10 year direct obligations issued by the government of the United States plus
3.5%. The interest rate on any unpaid principal will increase by a further 0.5%
every three months, not to exceed 16%. The interest rate at September 30, 1999
was 11.25%. On June 8, 2000, the Senior Notes are subject to a mandatory
exchange for, at the option of the holder, either an "Extended Note" in a
principal amount equal to the principal amount of the Senior Notes, or a
"Rollover Note" in a principal amount equal to the principal amount of the
Senior Notes plus 3% of such principal amount. The Extended
F-38
<PAGE> 293
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Note shall accrue interest at 14% per annum and shall mature no later than ten
years after issuance. The Rollover Note shall accrue interest at 14% per annum
and mature ten years after issuance. The Company is in discussions with various
parties relating to a private placement offering to refinance the Senior Notes.
(c) In July 1999, the Company also issued 80 million Irish punts
($109,080,000) principal amount Variable Rate Redeemable Guaranteed Loan Notes
due 2002 (the "Guaranteed Notes") in connection with the Cablelink acquisition.
Interest on the Guaranteed Notes is payable quarterly at EURIBOR. The EURIBOR
rate at September 30, 1999 was 2.698%. The Guaranteed Notes may be redeemed at
any time, at the option of the holder, at par plus accrued and unpaid interest
to the date of the redemption. The Guaranteed Notes are subject to mandatory
redemption in January 2002. The Company deposited 87 million Irish punts
($118,625,000) into escrow as cash collateral for the Guaranteed Notes, which is
included in other noncurrent assets.
(d) In May 1999, the Company called for redemption all of its $275,000,000
principal amount of 7% Convertible Subordinated Notes due 2008 (the "7% Notes")
at a redemption price of 104.9% of the principal amount, plus accrued and unpaid
interest. In June 1999, all of the 7% Notes were converted into approximately
9,075,000 shares of NTL Incorporated common stock at the applicable conversion
price of $30.30 per share. The unamortized deferred financing costs related to
the 7% Notes of $6,415,000 were written-off to equity.
(e) In April 1999, the Company issued L330,000,000 aggregate principal
amount at maturity of 9 3/4% Senior Deferred Coupon Sterling Notes due 2009 (the
"9 3/4% Notes"). The 9 3/4% Notes were issued at a price of 62.11% of the
aggregate principal amount at maturity or L204,963,000. The aggregate of the
discounts, commissions and the fees incurred of $8,465,000 is included in
deferred financing costs. The original issue discount accretes at a rate of
9 3/4%, compounded semiannually, to an aggregate principal amount of
L330,000,000 by April 15, 2004. Interest will thereafter accrue at 9 3/4% per
annum, payable semiannually beginning on October 15, 2004. The 9 3/4% Notes may
be redeemed at the Company's option, in whole or in part, at any time on or
after April 15, 2004 at 104.875% that declines annually to 100% in 2007, plus
accrued and unpaid interest to the date of redemption.
8. COMPREHENSIVE LOSS
The Company's comprehensive loss for the nine months ended September 30,
1999 and 1998 was $(872,170,000) and $(268,998,000), respectively.
F-39
<PAGE> 294
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
9. SEGMENT DATA
<TABLE>
<CAPTION>
LOCAL
TELECOMS CORPORATE
AND NATIONAL AND
BROADCAST TELEVISION TELECOMS OTHER TOTAL
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenues.............................. $119,900 $ 583,728 $ 349,232 $ -- $1,052,860
EBITDA (1)............................ 76,404 163,625 89,418 (199,999) 129,448
NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues.............................. $100,825 $ 214,545 $ 166,845 $ 2,375 $ 484,590
EBITDA (1)............................ 67,681 48,408 18,789 (85,834) 49,044
Total assets
September 30, 1999.................... $303,387 $5,676,318 $1,074,260 $2,314,718 $9,368,683
December 31, 1998..................... 289,068 3,100,492 761,097 2,043,440 6,194,097
</TABLE>
- ---------------
(1) Represents earnings before interest, taxes, depreciation and amortization,
corporate expenses and franchise fees.
The reconciliation of segment combined EBITDA to net loss is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
1999 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Segment Combined EBITDA..................................... $ 129,448 $ 49,044
(Add) Deduct:
Franchise fees............................................ 22,287 18,729
Corporate expenses........................................ 18,475 11,797
Depreciation and amortization............................. 518,356 156,785
Interest and other income................................. (26,829) (39,796)
Interest expense.......................................... 484,570 226,422
Foreign currency transaction (gains) losses............... (22,523) 6,973
Loss from early extinguishment of debt.................... -- 4,239
--------- ---------
994,336 385,149
--------- ---------
Net (loss).................................................. $(864,888) $(336,105)
========= =========
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
As of September 30, 1999, the Company was committed to pay approximately
$276,000,000 for equipment and services.
The Company has certain exclusive local delivery operator licenses for
Northern Ireland and other franchise areas in the United Kingdom. Pursuant to
these licenses, various subsidiaries of the Company are required to make monthly
cash payments to the ITC during the 15 year license terms. The Company has paid
L14.4 million ($22.3 million) through September 30, 1999 in connection with
these licenses. The Company has requested the ITC to convert all of its
exclusive licenses to non-exclusive licenses by the end of 1999. The Company's
liability for license payments will end upon the conversion.
F-40
<PAGE> 295
NTL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business. None of these matters
are expected to have a material adverse effect on the Company's financial
position, results of operations or cash flows.
F-41
<PAGE> 296
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
COMCAST UK CABLE PARTNERS LIMITED
We have audited the accompanying consolidated balance sheet of Comcast UK
Cable Partners Limited (a company incorporated in Bermuda) and subsidiaries as
of December 31, 1997, and the related consolidated statements of operations,
shareholders' equity and of cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Comcast UK Cable Partners
Limited and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 27, 1998
F-42
<PAGE> 297
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. L 37,372
Accounts receivable, less allowance for doubtful accounts
of L2,598.............................................. 4,255
Other current assets...................................... 5,419
---------
Total current assets................................... 47,046
---------
INVESTMENTS IN AFFILIATES................................... 61,363
---------
PROPERTY AND EQUIPMENT...................................... 315,702
Accumulated depreciation.................................. (33,000)
---------
Property and equipment, net............................... 282,702
---------
DEFERRED CHARGES............................................ 60,770
Accumulated amortization.................................. (13,985)
---------
Deferred charges, net..................................... 46,785
---------
FOREIGN EXCHANGE PUT OPTIONS AND OTHER, NET................. 7,958
---------
L 445,854
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 23,605
Current portion of long-term debt......................... 1,683
Due to affiliates......................................... 920
---------
Total current liabilities.............................. 26,208
---------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 234,010
---------
FOREIGN EXCHANGE CALL OPTIONS............................... 2,688
---------
LONG-TERM DEBT, DUE TO SHAREHOLDER.......................... 11,272
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, L.01 par value -- authorized, 10,000,000
shares; issued none....................................
Class A common shares, L.01 par value -- authorized,
50,000,000 shares; issued, 37,231,997.................. 372
Class B common shares, L.01 par value -- authorized,
50,000,000 shares; issued, 12,872,605.................. 129
Additional capital........................................ 358,548
Accumulated deficit....................................... (187,373)
---------
Total shareholders' equity............................. 171,676
---------
L 445,854
=========
</TABLE>
See notes to consolidated financial statements.
F-43
<PAGE> 298
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN L000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
1997
-----------
<S> <C>
REVENUES
Service income.............................................. L 55,603
Consulting fee income..................................... 1,059
--------
56,662
--------
COSTS AND EXPENSES
Operating................................................. 19,624
Selling, general and administrative....................... 30,850
Management fees........................................... 3,204
Depreciation and amortization............................. 25,588
--------
79,266
--------
OPERATING LOSS.............................................. (22,604)
OTHER (INCOME) EXPENSE
Interest expense.......................................... 25,243
Investment income......................................... (7,259)
Equity in net losses of affiliates........................ 21,359
Exchange losses (gains) and other......................... 5,409
--------
44,752
--------
NET LOSS.................................................... (L67,356)
========
NET LOSS PER SHARE.......................................... (L 1.34)
========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING........ 50,105
========
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE> 299
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
1997
-----------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... (L67,356)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 25,588
Amortization on foreign exchange contracts............. 2,770
Non-cash interest expense.............................. 24,684
Non-cash investment income............................. (2,521)
Exchange losses........................................ 2,852
Equity in net losses of affiliates..................... 21,359
Other.................................................. 991
Increase in accounts receivable, other current assets
and other............................................. (3,447)
Increase in accounts payable and accrued expenses...... 519
Increase in due to affiliates.......................... 244
--------
Net cash provided by operating activities............ 5,683
--------
FINANCING ACTIVITIES
Repayments of debt..................................... (1,633)
--------
Net cash (used in) financing activities.............. (1,633)
--------
INVESTING ACTIVITIES
Proceeds from sales of short-term investments, net..... 61,466
Capital contributions and loans to affiliates.......... (8,713)
Capital expenditures................................... (82,125)
Additions to deferred charges.......................... (620)
--------
Net cash (used in) investing activities........... (29,992)
--------
(DECREASE) IN CASH AND CASH EQUIVALENTS..................... (25,942)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 63,314
--------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... L 37,372
========
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE> 300
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
A COMMON B COMMON
--------------- --------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........ 37,232 L372 12,873 L129 L358,548 (L120,017) L239,032
Net loss.......................... (67,356) (67,356)
------ ---- ------ ---- -------- --------- --------
BALANCE, DECEMBER 31, 1997........ 37,232 L372 12,873 L129 L358,548 (L187,373) L171,676
====== ==== ====== ==== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE> 301
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
1. BUSINESS
Comcast UK Cable Partners Limited and subsidiaries (the "Company"), a
Bermuda company incorporated in 1992, was formed to develop, construct, manage
and operate the interests of Comcast Corporation ("Comcast") in the United
Kingdom ("UK") cable and telecommunications industry. The Company is a
controlled subsidiary of Comcast U.K. Holdings, Inc. ("Holdings"), a Delaware
corporation indirectly wholly owned by Comcast. As of December 31, 1997, the
Company has interests in four operations (the "Partners Operating Companies"):
Birmingham Cable Corporation Limited ("Birmingham Cable"), in which the Company
owns a 27.5% interest, Cable London PLC ("Cable London"), in which the Company
owns a 50.0% interest, Cambridge Holding Company Limited ("Cambridge Cable"), in
which the Company owns a 100% interest and two companies holding the franchises
for Darlington and Teesside, England ("Teesside"), in which the Company owns a
100% interest. The Company also owns a 100% interest in Comcast UK Holdings
Limited ("UK Holdings"), a company incorporated in Bermuda in December 1997.
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary of NTL
Incorporated ("NTL"). NTL is an alternative telecommunications company in the UK
and is listed on Nasdaq. The NTL Transaction is expected to close in 1998,
subject to, among other things, the receipt of required Bermuda and UK
regulatory approvals, the approval of the Company's and NTL's shareholders, the
consent of the Company's and NTL's bondholders, the consent of certain NTL bank
lenders and other customary closing matters. Comcast, through Holdings, is the
sole holder of the multiple-voting Class B Common Shares of the Company and has
agreed to vote for the transaction, assuring its approval by the Company's
shareholders. Upon consummation of the NTL Transaction, the Company would become
a wholly owned subsidiary of NTL.
Except in the circumstances described below, the Company's shareholders
will receive 0.3745 shares of NTL common stock for each of the Company's Class A
Common Shares or Class B Common Shares. If the average closing price of the NTL
common stock for a specified period of time prior to the Company's shareholders
meeting to approve the NTL Transaction (the "Average Price") is less than
$26.70, the Company will have the option to terminate the NTL Transaction,
subject to the right of NTL to adjust the exchange ratio such that one share of
the Company's Class A Common Shares or Class B Common Shares will be exchanged
for a number of shares of NTL common stock equal to $10.00 (based on the Average
Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London and
Birmingham Cable, Telewest has certain rights (the "Telewest Rights") to acquire
either or both of the Company's interests in these systems as a result of the
NTL Transaction. However, as described in the following paragraphs, the
consummation of the NTL Transaction is not dependent on the resolution of the
Telewest Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL), in
lieu of a portion of the consideration allocable to the interest subject to the
exercised Telewest Rights, the per share proceeds from the sale of the interest
to Telewest (net of taxes on gain on sale), payable in cash or shares of NTL
common stock valued at the greater of $30.00 per share or the Average Price at
closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of NTL
preferred stock equal to a portion of the consideration allocable to the
interest subject to the unexercised Telewest Rights. Any shares of NTL preferred
stock would have the same voting and dividend rights as shares of NTL common
stock, would be subject to redemption as described below, and would be expected
to be listed for trading on Nasdaq. If following closing the Telewest Rights are
exercised, the
F-47
<PAGE> 302
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
NTL preferred stock will be redeemed for the Exercise Consideration (based on
the Average Price at the time of exercise). If the Telewest Rights are resolved
without being exercised, the NTL preferred stock will be redeemed for NTL common
stock on a one-for-one basis.
Of the consideration to be received by the Company's shareholders in the
NTL Transaction, the parties have allocated 31% to the Company's interest in
Cable London and 17% to the Company's interest in Birmingham Cable. However, if
either or both of the Telewest Rights are exercised, the actual consideration to
be received by the Company's shareholders may be materially different from the
portion of the consideration (the "allocable portion") which has been allocated
by the parties to the Company's respective interests in Cable London and
Birmingham Cable, depending on, among other things, the value of these
interests, as finally determined, whether NTL exercises its option to deliver
the Exercise Consideration in lieu of the allocable portion and, the amount of
any taxes payable by the Company on the sale of these interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Subsidiaries of the Company maintain their books and records in accordance
with accounting principles generally accepted in the UK. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles as practiced in the United States ("US") and are stated in
UK pounds sterling ("UK Pound"). There were no significant differences between
accounting principles followed for UK purposes and generally accepted accounting
principles practiced in the US. The UK Pound exchange rate as of December 31,
1997 was US $1.65.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997, and have
not been comprehensively revalued for purposes of these consolidated financial
statements since such dates. The carrying value of the amounts due to affiliates
and long-term debt due to shareholder approximates fair value as of December 31,
1997.
F-48
<PAGE> 303
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Cash Equivalents
Cash equivalents consist principally of commercial paper, time deposits and
money market funds with maturities of three months or less when purchased. The
carrying amounts of the Company's cash equivalents approximate their fair
values.
Investments in Affiliates
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the investee
are accounted for under the equity method. Equity method investments are
recorded at original cost and adjusted periodically to recognize the Company's
proportionate share of the investees' net income or losses after the date of
investment, additional contributions made and dividends received. The
differences between the Company's recorded investments and its proportionate
interests in the book value of the investees' net assets are being amortized to
equity in net losses of affiliates over the remaining original lives of the
related franchises of eight years.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems in Teesside
and Cambridge Cable under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 51, "Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are expensed as incurred. Costs incurred in anticipation of
servicing a fully operating system that will not vary regardless of the number
of subscribers are partially expensed and partially capitalized, based upon the
percentage of average actual or estimated subscribers, whichever is greater, to
the total number of subscribers expected at the end of the Prematurity Period
(the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, two of the Company's five franchise areas which
are under construction have completed their Prematurity Period. The remaining
Prematurity Periods are expected to terminate at various dates in 1998 and 1999.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
F-49
<PAGE> 304
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 15-40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-10 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Fixtures, fittings and equipment............................ 5 years
Vehicles.................................................... 4 years
Computers................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in long-term debt. Capital
lease payments include principal and interest, with the interest portion being
expensed. Payments on operating leases are expensed on a straight-line basis
over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition costs
attributable to obtaining, developing and maintaining the franchise licenses of
Teesside and Cambridge Cable, debt acquisition costs relating to the sale of
approximately $517.3 million principal amount at maturity of the Company's
11.20% Senior Discount Debentures Due 2007 (the "2007 Discount
Debentures" -- see Note 7) and goodwill arising from the SingTel Transaction
(see Note 4). Franchise acquisition costs are being amortized on a straight-line
basis over the remaining original lives of the related franchises of 12 to 15
years. Debt acquisition costs are being amortized on a straight-line basis over
the term of the 2007 Discount Debentures of 12 years. Goodwill is being
amortized on a straight-line basis over the remaining original lives of the
related franchises of 11 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
F-50
<PAGE> 305
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Stock-Based Compensation
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to record compensation cost for stock-based compensation
plans at fair value. The Company has elected to continue to account for stock-
based compensation in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations, as
permitted by SFAS No. 123. Compensation expense for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Compensation expense for stock appreciation rights is recorded annually based on
changes in quoted market prices of the Company's stock or other determinants of
fair value at the end of the year (see Note 8).
Income Taxes
The Company is exempt from US federal, state and local income taxes. At the
present time, no income, profit, capital or capital gains taxes are levied in
Bermuda and, accordingly, no provision for such taxes has been recorded by the
Company. In the event that such taxes are levied, the Company has received an
undertaking from the Bermuda Government exempting it from all such taxes until
March 2016.
The Company's wholly owned subsidiaries recognize deferred tax assets and
liabilities for temporary differences between the financial reporting basis and
the tax basis of their assets and liabilities and expected benefits of utilizing
net operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, principally foreign
exchange option contracts ("FX Options"), to manage its exposure to fluctuations
in foreign currency exchange rates. Written FX Options are marked-to-market on a
current basis in the Company's consolidated statement of operations (see Note
6).
Those instruments that have been entered into by the Company to hedge
exposure to foreign currency exchange rate risks are periodically examined by
the Company to ensure that the instruments are matched with underlying
liabilities, reduce the Company's risks relating to foreign currency exchange
rates, and, through market value and sensitivity analysis, maintain a high
correlation to the underlying value of the hedged item. For those instruments
that do not meet the above criteria, variations in their fair value are
marked-to-market on a current basis in the Company's consolidated statement of
operations.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Notes 6 and
7). The credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be exposed to
losses in the event of nonperformance by the counterparties, the Company does
not expect such losses, if any, to be significant.
Net Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share," which was adopted by the Company effective
for the year ended December 31, 1997, as required by the statement. For the year
ended December 31, 1997 the Company's potential common shares have an
antidilutive effect on the loss per share and, therefore, have not been used in
determining the total weighted average number of common shares outstanding.
Diluted loss per share for 1997 is antidilutive and, therefore, has not been
presented.
F-51
<PAGE> 306
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
3. TEESSIDE ACQUISITION
In June 1994, the Company acquired all of the outstanding shares of two
companies that owned Teesside, which comprise an area containing approximately
254,000 homes. The construction of Teesside's cable telecommunications network
commenced in the third quarter of 1994. Teesside added its initial cable and
telephony subscribers in June 1995.
4. SINGTEL TRANSACTION
In March 1996, the Company completed the acquisition (the "SingTel
Transaction") of Singapore Telecom International Pte. Limited's ("Singapore
Telecom") 50% interest in Cambridge Cable, pursuant to the terms of a Share
Exchange Agreement executed by the parties in December 1995. In exchange for
Singapore Telecom's 50% interest in Cambridge Cable and certain loans made to
Cambridge Cable, with accrued interest thereon, the Company issued approximately
8.9 million of its Class A Common Shares and paid approximately L11.8 million to
Singapore Telecom. The Company accounted for the SingTel Transaction under the
purchase method. As a result of the SingTel Transaction, the Company owns 100%
of Cambridge Cable and Cambridge Cable was consolidated with the Company
effective March 31, 1996.
5. INVESTMENTS IN AFFILIATES
The Company has invested in two affiliates (the "Equity Investees"):
Birmingham Cable and Cable London. The Equity Investees operate integrated cable
communications, residential telephony and business telecommunications systems in
their respective major metropolitan areas under exclusive cable television
licenses and non-exclusive telecommunications licenses. As of December 31, 1997,
the Company's ownership interest in the Equity Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable............................................ 27.5%
Cable London................................................ 50.0%
</TABLE>
The Company also has a 16.4% interest in Cable Programme Partners-1 Limited
Partnership ("CPP-1") which previously developed and distributed cable
programming in the UK. During 1995, CPP-1 sold its only channel and has wound
down its operations to a minimal level of activity. The carrying value of the
Company's investment in CPP-1 has been reduced to zero and the Company has no
future funding commitments to CPP-1.
Included in investments in affiliates as of December 31, 1997 are loans to
Cable London of L28.5 million and accrued interest of L6.0 million. The loans
accrue interest at a rate of 2% above the published base lending rate of
Barclays Bank PLC (9.25% effective rate as of December 31, 1997) and are
subordinate to Cable London's revolving bank credit facility. Of these loans,
L21.0 million as of December 31, 1997 are convertible into ordinary shares of
Cable London at a per share conversion price of L2.00. Also included in
investments in affiliates as of December 31, 1997 are loans to Birmingham Cable
of L1.9 million and accrued interest of L133,000. The Birmingham Cable loans
accrue interest at a fixed rate of 7.80% and are subordinate to Birmingham
Cable's credit facility.
In February 1995, a subsidiary of Birmingham Cable issued 175,000
cumulative L1.00 redeemable five year term preference shares for a paid up value
of L175.0 million. Also in February 1995, Birmingham Cable entered into a L175.0
million five year revolving credit facility (the "Birmingham Facility") which
provided for conversion into a five year term loan on March 31, 2000. In March
1997, the terms of the Birmingham Facility were amended to extend the maturity
of the term loan to December 31, 2005 and to amend the required cash flow levels
(as defined) and certain other terms. Interest rates on the Birmingham Facility
are at the London Interbank Offered Rate ("LIBOR") plus 5/8% to 2 1/4%.
F-52
<PAGE> 307
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
In July 1997, the preference shareholder exercised its option to require
Birmingham Cable to purchase its shareholding. Birmingham Cable funded the
redemption of the preference shares with the proceeds from the Birmingham
Facility and restricted cash and settled its five year L175.0 million interest
rate exchange agreement with Barclays Bank PLC. The balance of the Birmingham
Facility will be used, subject to certain restrictions, for capital expenditures
and working capital requirements relating to the build-out of its systems. The
preference shares had an effective dividend rate, including Advanced Corporation
Tax ("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit
Birmingham Cable's ability to enter into arrangements for the acquisition and
sale of property and equipment, investments, mergers and the incurrence of
additional debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. Birmingham Cable's three principal
shareholders' (including the Company) right to receive consulting fee payments
from Birmingham Cable has been subordinated to the banks under the Birmingham
Facility. The payment of consulting fees is restricted until Birmingham Cable
meets certain financial ratio tests under the Birmingham Facility. Birmingham
Cable has pledged the shares of its material subsidiaries to secure the
Birmingham Facility. Upon a change of control, all amounts due under the
Birmingham Facility become immediately due and payable. The consummation of the
NTL Transaction will not result in a change of control as defined in the
Birmingham Facility.
In May 1997, Cable London entered into a L170.0 million revolving credit
facility (the "London Revolver") with various banks, which converts into a five
year term loan on June 30, 2001. Interest rates on the London Revolver are at
LIBOR plus 1/2% to 2 3/8%. In May 1997, Cable London repaid all amounts
outstanding under its existing credit facility with proceeds from borrowings
under the London Revolver. The balance of the London Revolver will be used,
subject to certain restrictions, for capital expenditures and working capital
requirements relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit Cable
London's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's right to receive consulting fee payments from Cable London has
been subordinated to the banks under the London Revolver. The payment of
consulting fees is restricted until Cable London meets certain financial ratio
tests under the London Revolver. In addition, the Company's shares in Cable
London have been pledged to secure the London Revolver. Upon a change of
control, all amounts due under the London Revolver become immediately due and
payable. The consummation of the NTL Transaction will not result in a change of
control as defined in the London Revolver.
Although the Company is not contractually committed to make any additional
capital contributions or advances to any of the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures and
to finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
F-53
<PAGE> 308
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Summarized financial information for affiliates accounted for under the
equity method for 1997 is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
---------- -------- ---------
L000 L000 L000
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Results of operations
Service income............................................ L 67,166 L 52,816 L 119,982
Operating, selling, general and administrative expenses... (56,564) (45,787) (102,351)
Depreciation and amortization............................. (26,427) (19,740) (46,167)
Operating loss............................................ (15,825) (12,711) (28,536)
Net loss.................................................. (30,826) (25,168) (55,994)
Company's equity in net loss.............................. (8,616) (12,743) (21,359)
AT DECEMBER 31, 1997
Financial position
Current assets............................................ 11,424 10,340 21,764
Noncurrent assets......................................... 248,611 185,353 433,964
Current liabilities....................................... 22,293 22,902 45,195
Noncurrent liabilities.................................... 165,413 173,038 338,451
</TABLE>
6. FOREIGN CURRENCY RISK MANAGEMENT
The Company is exposed to market risk including changes in foreign currency
exchange rates. To manage the volatility relating to this exposure, the Company
enters into various derivative transactions pursuant to the Company's policies
in areas such as counterparty exposure and hedging practices. Positions are
monitored using techniques including market value and sensitivity analyses.
The Company has entered into certain FX Options as a normal part of its
foreign currency risk management efforts. During 1995, the Company entered into
certain foreign exchange put option contracts ("FX Puts") which may be settled
only on November 16, 2000. These FX Puts are used to limit the Company's
exposure to the risk that the eventual cash outflows related to net monetary
liabilities denominated in currencies other than its functional currency (the UK
Pound) (principally the 2007 Discount Debentures -- see Note 7) are adversely
affected by changes in exchange rates. As of December 31, 1997, the Company had
L250.0 million notional amount of FX Puts to purchase US dollars at an exchange
rate of $1.35 per L1.00 (the "Ratio"). The FX Puts provide a hedge, to the
extent the exchange rate falls below the Ratio, against the Company's net
monetary liabilities denominated in US dollars since gains and losses realized
on the FX Puts are offset against foreign exchange gains or losses realized on
the underlying net liabilities. Premiums paid for the FX Puts of L13.9 million
are included in foreign exchange put options and other in the Company's
consolidated balance sheet, net of related amortization. These premiums are
being amortized over the terms of the related contracts of five years. As of
December 31, 1997, the FX Puts had carrying values of L8.0 million. The
estimated fair value of the FX Puts was L3.2 million as of December 31, 1997.
In 1995, in order to reduce hedging costs, the Company sold foreign
exchange call option contracts ("FX Calls") to exchange L250.0 million notional
amount and received L3.4 million. These contracts may only be settled on their
expiration dates. Of these contracts, L200.0 million notional amount, with an
exchange ratio of $1.70 per L1.00, expired unexercised in November 1996 while
the remaining contract, with a L50.0 million notional amount and an exchange
ratio of $1.62 per L1.00, has a settlement date in November 2000. In the fourth
quarter of 1996, in order to continue to reduce hedging costs, the Company sold
additional FX Calls for L2.1 million, to exchange L200.0 million notional amount
at an average exchange
F-54
<PAGE> 309
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
ratio of $1.75 per L1.00. These contracts expired unexercised in the fourth
quarter of 1997. The FX Calls are marked-to-market on a current basis in the
Company's consolidated statement of operations.
As of December 31, 1997, the estimated fair value of the liabilities
related to the FX Calls, as recorded in the Company's consolidated balance
sheet, was L2.7 million. Changes in fair value between measurement dates
relating to the FX Calls resulted in exchange gains of L4.5 million during the
year ended December 31, 1997 in the Company's consolidated statement of
operations.
7. LONG-TERM DEBT
2007 Discount Debentures
In November 1995, the Company received net proceeds of approximately $291.1
million (L186.9 million) from the sale of its 2007 Discount Debentures in a
public offering ($517.3 million principal at maturity). Interest accretes on the
2007 Discount Debentures at 11.20% per annum compounded semi-annually from
November 15, 1995 to November 15, 2000, after which date interest will be paid
in cash on each May 15 and November 15 through November 15, 2007. The accreted
value of the 2007 Discount Debentures was L229.2 million as of December 31,
1997.
The 2007 Discount Debentures contain restrictive covenants which limit the
Company's ability to enter into arrangements for the sale of assets, mergers,
the incurrence of additional debt and the payment of dividends. The Company was
in compliance with such restrictive covenants as of December 31, 1997.
Consummation of the NTL Transaction (see Note 1) is subject to consent of the
Company's bondholders.
UK Holdings Credit Facility
On December 23, 1997, UK Holdings entered into a loan agreement (the "UK
Holdings Agreement") with a consortium of banks to provide financing under a
credit facility (the "UK Holdings Credit Facility") up to a maximum of L200.0
million. Under the terms of the UK Holdings Agreement, borrowings under the UK
Holdings Credit Facility are guaranteed by Teesside and Cambridge Cable.
On January 14, 1998, UK Holdings borrowed L75.0 million under Tranche A of
the UK Holdings Credit Facility. Of this initial borrowing, L50.4 million was
paid to the Company as a dividend and L17.8 million was used to fund capital
expenditures and working capital requirements at Cambridge Cable and Teesside.
Amounts available under the UK Holdings Credit Facility will be reduced each
quarter in varying amounts beginning March 31, 2000 and continuing through
December 31, 2000. The UK Holdings Credit Facility bears interest at a rate per
annum equal to LIBOR plus 1/2% to 2 1/4%.
The UK Holdings Credit Facility contains restrictive covenants which limit
UK Holdings' ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's right to receive consulting fee payments from Cambridge Cable and
Teesside has been subordinated to the banks under the UK Holdings Credit
Facility. In addition, the Company's shares in UK Holdings have been pledged to
secure the UK Holdings Credit Facility.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
F-55
<PAGE> 310
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Other
As of December 31, 1997, Cambridge Cable has two outstanding bank loans
totaling L505,000, which are included in long-term debt. These bank loans are
secured by Cambridge Cable's land and buildings in Cambridge and Bishop
Stortford and are payable in quarterly installments through April 2000 and bear
interest at a weighted average fixed rate of 9.35%. Also included in long-term
debt are capital lease obligations of Cambridge Cable and Teesside (see Note
12).
Maturities of long-term debt outstanding, including long-term debt, due to
shareholder (see Note 9), as of December 31, 1997 for the four years after 1998
are as follows (in L000's):
<TABLE>
<S> <C>
1999........................................................ L12,658
2000........................................................ 665
2001........................................................ 528
2002........................................................ 498
</TABLE>
The Company's long-term debt, excluding long-term debt due to shareholder,
had estimated fair values of L259.6 million as of December 31, 1997. The
estimated fair value of the Company's publicly traded debt is based on quoted
market prices for that debt. Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities are
used to estimate fair value for debt issues for which quoted market prices are
not available.
8. STOCK OPTION/SAR PLANS
The Company implemented a Stock Appreciation Rights ("SARs") plan during
1995 for certain outside directors under which the terms of the SARs granted are
determined by the Compensation Committee of the Board of Directors (the "SAR
Plan"). Under the SAR Plan, eligible participants are entitled to receive a cash
payment from the Company equal to 100% of the excess, if any, of the fair market
value of a share of the Company's Class A Common Shares at the time of exercise
over the fair market value of such a share at the grant date. Under the SAR
Plan, a total of 50,000 SARs may be granted. The SARs have a term of ten years
from the date of grant and are immediately exercisable. No SARs were granted in
1997. A total of 6,000 and 15,000 SARs were granted in 1996 and 1995,
respectively and 14,000 SARs were outstanding at December 31, 1997, all
exercisable. The fair value of the Company's Class A Common Stock at the grant
date of the SARs was $12.63 and $16.25 for 1996 and 1995 grants, respectively.
No compensation expense was recognized during the year ended December 31, 1997
as the exercise price of the SARs was not less then the fair value of a share of
the Company's Class A Common Shares.
The Company implemented a qualified stock option plan during 1995 for
certain employees, officers and directors, under which the option prices and
other terms are determined by the Compensation Committee of the Board of
Directors (the "Option Plan"). Under the Option Plan, not more than 250,000 of
the Company's Class A Common Shares may be issued pursuant to the plan upon
exercise of qualified stock options. All options must be granted within ten
years from the date of adoption of the Option Plan, with options becoming
exercisable over four years from the date of grant. A total of 20,250 options,
with an exercise price of $12.63, were granted in 1996 and are outstanding (none
exercisable) at December 31, 1997. No options were granted in 1997 or 1995. No
compensation expense has been recognized under the Option Plan as the exercise
price of the grants was not less than the fair market value of the shares at the
grant date.
9. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc. ("UK Consulting"), a wholly owned subsidiary
of the Company, earns consulting fee income under consulting agreements with the
Equity Investees. The consulting fee income is
F-56
<PAGE> 311
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
generally based on a percentage of gross revenues or a fixed amount per dwelling
unit in the Equity Investees' franchise areas.
The Company's right to receive consulting fee payments from Birmingham
Cable and Cable London has been subordinated to the banks under their credit
facilities. Accordingly, a portion of these fees have been classified as
long-term receivables and are included in investments in affiliates in the
Company's consolidated balance sheet. In addition, the Company's shares in Cable
London have been pledged to secure amounts outstanding under the London
Revolver.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and Comcast UK
Cable Partners Consulting, Inc. ("Comcast Consulting"), an indirect wholly owned
subsidiary of Comcast, on the other, whereby Comcast and Comcast Consulting
provide consulting services to the Equity Investees on behalf of the Company and
management services to the Company. Such management fees are based on Comcast's
and Comcast Consulting's cost of providing such services. As of December 31,
1997, due to affiliates consists primarily of this management fee and operating
expenses paid by Comcast and its affiliates on behalf of the Company.
Investment income includes L2.5 million of interest income in 1997,
relating to the loans to Birmingham Cable, Cable London and Cambridge Cable
described in Note 5.
Long-term debt, due to shareholder consists of 9% Subordinated Notes
payable to Holdings (the "Notes") which are due in 1999. During the year ended
December 31, 1997 interest expense on the Notes was L950,000.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
10. INCOME TAXES
The Company's wholly owned subsidiaries have a deferred tax asset arising
from the carryforward of net operating losses and the differences between the
book and tax basis of property. However, a valuation allowance has been recorded
to fully reserve the deferred tax asset as its realization is uncertain.
Significant components of deferred income taxes are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 14,382
Differences between book and tax basis of property.......... 7,959
Other....................................................... 321
Less: Valuation allowance................................... (22,662)
--------
L --
========
</TABLE>
11. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately L559,000
during the year ended December 31, 1997.
The Company's wholly owned subsidiaries incurred capital lease obligations
of L2.1 million during the year ended December 31, 1997.
F-57
<PAGE> 312
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
12. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2008.
A summary of assets held under capital lease are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
Land, buildings and equipment............................... L10,735
Less: Accumulated depreciation.............................. (3,165)
-------
L 7,570
=======
</TABLE>
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998........................................................ L 2,191 L 1,580
1999........................................................ 1,753 969
2000........................................................ 902 283
2001........................................................ 706 63
2002........................................................ 629 63
Thereafter.................................................. 1,731 36
------- -------
Total minimum rental commitments............................ L 7,912 L 2,994
=======
Less: Amount representing interest.......................... (1,874)
-------
Present value of minimum rental commitments................. 6,038
Less: Current portion of capital lease obligations.......... (1,660)
-------
Long-term portion of capital lease obligations.............. L 4,378
=======
</TABLE>
Operating lease expense for the years ended December 31, 1997 was L1.7
million.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- ---------- -------- ---------- --------
(L000, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
Revenues............................. L 12,351 L 13,350 L 14,241 L 16,720 L 56,662
Operating loss....................... (6,543) (6,364) (5,679) (4,018) (22,604)
Equity in net losses of affiliates... (5,152) (5,162) (5,195) (5,850) (21,359)
Net loss............................. (20,540) (13,108) (20,682) (13,026) (67,356)
Net loss per share................... (.41) (.26) (.41) (.26) (1.34)
</TABLE>
F-58
<PAGE> 313
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
-------------
(UNAUDITED)
(IN L000'S,
EXCEPT SHARE DATA)
<S> <C>
CURRENT ASSETS
Cash and cash equivalents................................. L 86,363
Accounts receivable, less allowance for doubtful accounts
of L3,204.............................................. 4,075
Other current assets...................................... 5,932
---------
Total current assets.............................. 96,370
---------
INVESTMENTS IN AFFILIATES................................... 50,307
---------
PROPERTY AND EQUIPMENT...................................... 364,693
Accumulated depreciation.................................. (51,205)
---------
Property and equipment, net............................... 313,488
---------
DEFERRED CHARGES............................................ 58,785
Accumulated amortization.................................. (14,587)
---------
Deferred charges, net..................................... 44,198
---------
FOREIGN EXCHANGE PUT OPTIONS, NET........................... 5,886
---------
L 510,249
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 25,783
Accrued interest.......................................... 271
Current portion of long-term debt......................... 94,941
Notes payable to Comcast U.K. Holdings, Inc. ............. 12,037
Other..................................................... 809
---------
Total current liabilities......................... 133,841
---------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 246,677
---------
FOREIGN EXCHANGE CALL OPTION................................ 2,562
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, L0.1 par value -- authorized 10,000,000
shares; issued, none................................... --
Class A common shares, L.01 par value -- authorized
50,000,000 shares; issued, 37,231,997.................. 372
Class B common shares, L.01 par value -- authorized
50,000,000 shares; issued, 12,872,605.................. 129
Additional capital........................................ 358,548
Accumulated deficit....................................... (231,880)
---------
Total shareholders' equity........................ 127,169
---------
L 510,249
=========
</TABLE>
See notes to condensed consolidated financial statements.
F-59
<PAGE> 314
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
--------- ---------
(IN L000'S,)EXCEPT PER SHARE
DATA
<S> <C> <C>
REVENUES
Service income............................................ L 55,692 L 39,166
Consulting fee income..................................... 840 776
--------- ---------
56,532 39,942
--------- ---------
COSTS AND EXPENSES
Operating................................................. 18,147 14,484
Selling, general and administrative....................... 26,089 22,720
Management fees........................................... 2,174 2,494
Depreciation and amortization............................. 22,952 18,830
--------- ---------
69,362 58,528
--------- ---------
OPERATING LOSS.............................................. (12,830) (18,586)
OTHER (INCOME) EXPENSE
Interest expense.......................................... 26,751 18,706
Investment income......................................... (6,752) (5,807)
Equity in net losses of affiliates........................ 15,916 15,509
Exchange (gains) losses and other......................... (4,238) 7,336
--------- ---------
31,677 35,744
--------- ---------
NET LOSS.................................................... (44,507) (54,330)
ACCUMULATED DEFICIT
Beginning of period.................................... (187,373) (120,017)
--------- ---------
End of period.......................................... L(231,880) L(174,347)
========= =========
NET LOSS PER SHARE.......................................... L (.89) L (1.08)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING
THE PERIOD................................................ 50,105 50,105
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-60
<PAGE> 315
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1997
-------- --------
L000 L000
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... (L44,507) (L54,330)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 22,952 18,830
Amortization on foreign exchange contracts............. 2,072 2,072
Non-cash interest expense.............................. 20,168 18,300
Non-cash investment income............................. (2,181) (1,825)
Exchange (gains) losses................................ (7,211) 7,116
Equity in net losses of affiliates..................... 15,916 15,509
(Increase) decrease in account receivable and other
current assets........................................ (333) 150
Increase in accounts payable and accrued expenses and
accrued interest...................................... 2,449 3,177
-------- --------
Net cash provided by operating activities......... 9,325 8,999
-------- --------
FINANCING ACTIVITIES
Repayments of debt........................................ (1,567) (1,111)
Proceeds from borrowings.................................. 93,000
Deferred financing costs.................................. (1,634)
Net transactions with affiliates.......................... (1,020) (1,517)
-------- --------
Net cash provided by (used in) financing
activities...................................... 88,779 (2,628)
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of short-term investments, net........ 45,805
Capital contributions and loans to affiliates............. (1,768) (8,670)
Capital expenditures...................................... (47,012) (59,709)
Deferred charges.......................................... (333) (687)
-------- --------
Net cash used in investing activities............. (49,113) (23,261)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 48,991 (16,890)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 37,372 63,314
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... L 86,363 L 46,424
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-61
<PAGE> 316
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of September 30, 1998, the
condensed consolidated statement of operations and accumulated deficit for the
nine months ended September 30, 1998 and 1997, and the condensed consolidated
statement of cash flows for the nine months ended September 30, 1998 and 1997
have been prepared by NTL (Bermuda) Limited (formerly Comcast UK Cable Partners
Limited) (the "COMPANY") and have not been audited by the Company's independent
auditors. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of September 30, 1998 and for
all periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended September 30, 1998
are not necessarily indicative of operating results for the full year.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used in
1998.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Company has adopted SFAS No. 130, which
had no effect on the consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The Company is assessing whether changes in reporting will be required
upon the adoption of this new standard. The Company will adopt SFAS No. 131 for
fiscal year ending December 31, 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which establishes
accounting and reporting standards for derivatives and hedging activities, is
effective for fiscal years beginning after June 15, 1999. Upon the adoption of
SFAS No. 133, all derivatives are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
The Company is currently evaluating the impact the adoption of SFAS No. 133 will
have on its financial position and results of operations.
F-62
<PAGE> 317
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
3. AMALGAMATION WITH NTL
Effective October 29, 1998, NTL Incorporated ("NTL"), NTL (Bermuda)
Limited, a wholly owned subsidiary of NTL, and Comcast UK Cable Partners Limited
("Partners") consummated a transaction (the "Amalgamation") pursuant to the
Agreement and Plan of Amalgamation, dated February 4, 1998, as amended, among
the same (the "Amalgamation Agreement"), whereby NTL (Bermuda) Limited
amalgamated with Partners, such that the separate existence of NTL (Bermuda)
Limited and Partners continued in the form of the company that resulted from the
Amalgamation and which is a wholly owned subsidiary of NTL (the "Amalgamated
Company"). Under the terms of the Amalgamation Agreement, shareholders of
Partners received 0.3745 shares of common stock of NTL in consideration for each
of their shares of common stock of Partners. Accordingly, as a result of the
Amalgamation, shareholders of Partners received a total of approximately
18,700,000 shares of NTL common stock, representing approximately 31.2% of the
shares of NTL common stock outstanding after giving effect to the consummation
of the Amalgamation.
The Amalgamated Company shall operate under the name "NTL (Bermuda)
Limited". Effective as of the Amalgamation, (i) the memorandum of association of
NTL (Bermuda) Limited shall be the memorandum of the Amalgamated Company until
thereafter changed or amended as provided therein or by applicable law, (ii) the
bye-laws of NTL (Bermuda) Limited, as in effect immediately prior to the
Amalgamation, shall be the bye-laws of the Amalgamated Company until thereafter
changed or amended as provided therein or by applicable law and (iii) the
persons serving as directors and officers of NTL (Bermuda) Limited immediately
prior to the Amalgamation shall be the directors and officers, respectively, of
the Amalgamated Company until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal.
Immediately following the Amalgamation, the Amalgamated Company and Bank of
Montreal Trust Company, as trustee, executed a First Supplemental Indenture (the
"First Supplemental Indenture") relating to Partner's 11.20% Senior Discount
Debentures due 2007 (the "Debentures"), which provides for the assumption by the
Amalgamated Company of the liabilities and the obligations of Partners under the
Indenture, dated as of November 15, 1995, governing the Debentures (together
with the First Supplemental Indenture, the "Indenture") and the Debentures
issued pursuant thereto. The First Supplemental Indenture likewise provides that
the Amalgamated Company shall succeed to, and be substituted for, and may
exercise every right and power of, Partners under the Indenture and the
Debentures.
Pursuant to existing arrangements between Partners and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London PLC
("Cable London") and Birmingham Cable Corporation Limited ("Birmingham Cable"),
Telewest had certain rights to acquire either or both of Partner's interests in
these systems (see Note 4) as a result of the Amalgamation. On August 14, 1998,
Partners and NTL entered into an agreement (the "Telewest Agreement") with
Telewest relating to Partner's ownership interests in Birmingham Cable,
Partner's and Telewest's respective ownership interests in Cable London and
certain other related matters. Pursuant to the Telewest Agreement, Partners sold
its 27.5% ownership interest in Birmingham Cable to Telewest for L125 million,
plus L5 million for certain subordinated debt and fees. Partners and Telewest
have also agreed within a certain time period to rationalize their joint
ownership of Cable London pursuant to an agreed procedure (the "Shoot-out").
Between April 29 and July 29, 1999, the Amalgamated Company can notify Telewest
of the price at which it is willing to sell its 50% ownership interest in Cable
London to Telewest. Following such notification, Telewest at its option will be
required at that price to either purchase the Amalgamated Company's 50%
ownership interest in Cable London or sell its 50% ownership interest in Cable
London to the Amalgamated Company. If the Amalgamated Company fails to give
notice to Telewest during the Shoot-out period, it will be deemed to have given
a notice to Telewest offering to sell its Cable London interest for L100
million. The sale or purchase by the Company as per the Cable London Shoot-out
is expected to be completed by November 1999.
F-63
<PAGE> 318
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
4. INVESTMENTS IN AFFILIATES
The Company has invested in two affiliates: Birmingham Cable and Cable
London (together, the "Equity Investees"). The Equity Investees operate
integrated cable communications, residential telephony and business
telecommunications systems in their respective major metropolitan areas under
exclusive cable television licenses and non-exclusive telecommunications
licenses. As of September 30, 1998, the Company's ownership interest in the
Equity Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable............................................ 27.5%
Cable London................................................ 50.0%
</TABLE>
Included in investments in affiliates as of September 30, 1998, are loans
to Cable London of L28.5 million and accrued interest of L8.0 million. The loans
accrue interest at a rate of 2% above the published base lending rate of
Barclays Bank plc (9.5% effective rate as of September 30, 1998) and are
subordinate to Cable London's credit facility. Of these loans, L21.0 million as
of September 30, 1998, are convertible into ordinary shares of Cable London at a
per share conversion price of L2.00. Also included in investments in affiliates
as of September 30, 1998 are loans to Birmingham Cable of L3.7 million and
accrued interest of L320,000. The Birmingham Cable loans accrue interest at a
fixed rate of 7.8% and are subordinate to Birmingham Cable's credit facility.
As described in Note 3, the Company sold its interest in Birmingham Cable
in October 1998 for L125 million, plus L5 million for certain subordinated debt
and fees. The Company will record a gain on the sale of Birmingham Cable of
approximately L110 million in the fourth quarter of 1998. Also, the Company and
Telewest have agreed to the Cable London Shoot-out pursuant to which the Company
will either sell its interest in Cable London to Telewest or Telewest will sell
its interest in Cable London to the Company. The sale or purchase by the Company
as per the Cable London Shoot-out is expected to be completed by November 1999.
Although the Company is not contractually committed to make any additional
capital contributions or advances to Cable London, it currently intends to fund
its share of the amounts necessary for capital expenditures and to finance
operating deficits. Failure to do so could dilute the Company's ownership
interest in Cable London.
Summarized financial information for affiliates accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
---------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1998
Results of operations
Service income.................................. L 57,385 L 48,926 L106,311
Operating, selling, general and administrative
expenses..................................... (43,690) (38,244) (81,934)
Depreciation and amortization................... (20,717) (16,611) (37,328)
Operating loss.................................. (7,022) (5,929) (12,951)
Net loss........................................ (25,067) (17,523) (42,590)
Company's equity in net loss.................... (7,010) (8,906) (15,916)
</TABLE>
F-64
<PAGE> 319
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
---------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
AT SEPTEMBER 30, 1998
Financial position
Current assets.................................. 14,858 8,774 23,632
Noncurrent assets............................... 244,384 190,803 435,187
Current liabilities............................. 26,570 19,899 46,469
Noncurrent liabilities.......................... 185,410 197,448 382,858
NINE MONTHS ENDED SEPTEMBER 30, 1997
Results of operations
Service income.................................. 49,146 38,162 87,308
Operating, selling, general and administrative
expenses..................................... (42,411) (34,007) (76,418)
Depreciation and amortization................... (18,031) (13,930) (31,961)
Operating loss.................................. (11,296) (9,775) (21,071)
Net loss........................................ (21,715) (18,625) (40,340)
Company's equity in net loss.................... (6,077) (9,432) (15,509)
</TABLE>
5. LONG-TERM DEBT
In December 1997, Comcast UK Holdings Limited ("UK Holdings"), a wholly
owned subsidiary of the Company, entered into a loan agreement (the "UK Holdings
Agreement") with a consortium of banks to provide financing under a credit
facility (the "UK Holdings Credit Facility") up to a maximum of L200.0 million.
Under the terms of the UK Holdings Agreement, borrowings under the UK Holdings
Credit Facility are guaranteed by Cambridge Holding Company Limited ("Cambridge
Cable") and two companies holding the franchises for Darlington and Teesside,
England ("Teesside"). Cambridge Cable and Teesside are wholly owned subsidiaries
of the Company.
Final maturity of the UK Holdings Credit Facility is January 31, 2001. The
UK Holdings Credit Facility bears interest at a rate per annum equal to the
London Interbank Offered Rate ("LIBOR") plus 1/2% to 2 1/4%. As of September
30, 1998 the Company's effective weighted average interest rate on the UK
Holdings Credit Facility was 9.33%.
The consummation of the Amalgamation resulted in a change in control, as
defined in the UK Holdings Credit Facility, and all amounts outstanding
thereunder became immediately due and payable. The Company repaid the
approximately L100 million outstanding on October 29, 1998 using proceeds from
the sale of the Birmingham Cable interest. The banks have agreed to suspend the
UK Holdings Credit Facility for 90 days pending the renegotiation of the
facility. The amount outstanding under the UK Holdings Credit Facility of L93
million as of September 30, 1998 is classified as current on the Company's
condensed consolidated balance sheet as of that date.
6. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc., a wholly owned subsidiary of the Company,
earned consulting fee income under consulting agreements with the Equity
Investees. The consulting fee income was generally based on a percentage of
gross revenues or a fixed amount per dwelling unit in the Equity Investees'
franchise areas. The consulting agreements were terminated pursuant to the
Telewest Agreement.
The Company's right to receive consulting fee payments from the Equity
Investees was subordinated to the banks under their credit facilities.
Accordingly, these fees have been classified as long-term receivables
F-65
<PAGE> 320
NTL (BERMUDA) LIMITED (FORMERLY COMCAST UK
CABLE PARTNERS LIMITED) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
and are included in investments in affiliates in the Company's condensed
consolidated balance sheet. In addition, the Company's shares in Cable London
have been pledged to secure amounts outstanding under Cable London's revolving
credit facility.
Management fee expense was incurred under agreements between the Company on
the one hand, and Comcast Corporation ("Comcast"), the Company's former
controlling shareholder, and Comcast UK Cable Partners Consulting, Inc.
("Comcast Consulting"), an indirect wholly owned subsidiary of Comcast, on the
other, whereby Comcast and Comcast Consulting provided consulting services to
the Equity Investees on behalf of the Company and management services to the
Company. Such management fees were based on Comcast's and Comcast Consulting's
cost of providing such services. As of September 30, 1998 other current
liabilities consists primarily of this management fee and operating expenses
paid by Comcast and its affiliates on behalf of the Company. For the nine and
three months ended September 30, 1998 and 1997, investment income includes L2.2
million, L1.8 million, L754,000 and L676,000 of interest income, respectively,
relating to the loans to the Equity Investees.
For the nine and three months ended September 30, 1998 and 1997, investment
income includes L2.2 million, L1.8 million, L754,000 and L676,000 of interest
income, respectively, relating to the loans to the Equity Investees.
Long-term debt due to shareholder consists of 9% Subordinated Notes payable
to Comcast U.K. Holdings, Inc. which are due in September 1999. For the nine and
three months ended September 30, 1998 and 1997, the Company recorded L765,000,
L700,000, L262,000 and L239,000, respectively, of interest expense relating to
such notes.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
7. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
8. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of L6.3 million, L406,000, L2.5
million and L136,000 during the nine and three months ended September 30, 1998
and 1997, respectively.
The Company's wholly owned subsidiaries incurred capital lease obligations
of L2.2 million, L1.5 million, L486,000 and L852,000 during the nine and three
months ended September 30, 1998 and 1997, respectively.
F-66
<PAGE> 321
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
BIRMINGHAM CABLE CORPORATION LIMITED
We have audited the accompanying consolidated balance sheet of Birmingham
Cable Corporation Limited (a company incorporated in the United Kingdom) and
subsidiaries as of December 31, 1997 and the related consolidated statements of
operations, shareholders' equity and of cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Birmingham Cable Corporation
Limited and subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE
Birmingham, England
February 27, 1998 (March 16, 1998 as to Note 3)
F-67
<PAGE> 322
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. L 2,254
Accounts receivable, less allowance for doubtful accounts
of L4,834.............................................. 6,326
Other current assets...................................... 2,844
--------
Total current assets................................... 11,424
--------
PROPERTY AND EQUIPMENT...................................... 310,111
Accumulated depreciation.................................. (74,214)
--------
Property and equipment, net............................... 235,897
--------
DEFERRED CHARGES............................................ 18,112
Accumulated amortization.................................. (5,398)
--------
Deferred charges, net..................................... 12,714
--------
L260,035
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 18,997
Accrued interest.......................................... 1,611
Current portion of capital lease obligations.............. 1,685
--------
Total current liabilities.............................. 22,293
--------
LONG-TERM DEBT.............................................. 140,000
--------
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION............. 13,539
--------
LONG-TERM DEBT, DUE TO SHAREHOLDERS......................... 7,492
--------
OTHER LIABILITIES........................................... 4,382
--------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Ordinary shares, L1.00 par value -- authorized, 60,000,000
shares; issued, 51,073,486............................. 51,073
Additional capital........................................ 112,399
Accumulated deficit....................................... (91,143)
--------
Total shareholders' equity............................. 72,329
--------
L260,035
========
</TABLE>
See notes to consolidated financial statements.
F-68
<PAGE> 323
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997
------------
<S> <C>
SERVICE INCOME.............................................. L 67,166
--------
COSTS AND EXPENSES
Operating................................................. 28,942
Selling, general and administrative....................... 27,622
Depreciation and amortization............................. 26,427
--------
82,991
--------
OPERATING LOSS.............................................. (15,825)
INTEREST EXPENSE............................................ 17,500
INVESTMENT INCOME........................................... (2,499)
--------
NET LOSS.................................................... L(30,826)
========
</TABLE>
See notes to consolidated financial statements.
F-69
<PAGE> 324
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... L (30,826)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization.......................... 26,427
Non-cash interest expense.............................. 492
Decrease in accounts receivable, interest receivable
and other current assets.............................. 672
(Decrease) in accounts payable and accrued expenses,
accrued interest and other liabilities................ (9,027)
---------
Net cash (used in) operating activities.............. (12,262)
---------
FINANCING ACTIVITIES
Proceeds from borrowings.................................. 140,000
Loans from shareholders................................... 7,000
Redemption of preference shares........................... (175,000)
Repayment of capital leases............................... (2,316)
---------
Net cash (used in) financing activities................ (30,316)
---------
INVESTING ACTIVITIES
Restricted cash........................................... 75,000
Capital expenditures...................................... (36,635)
Deferred charges.......................................... (1,222)
---------
Net cash provided by investing activities............ 37,143
---------
(DECREASE) IN CASH AND CASH EQUIVALENTS..................... (5,435)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 7,689
---------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... L 2,254
=========
</TABLE>
See notes to consolidated financial statements.
F-70
<PAGE> 325
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN L000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........................... L51,073 L112,399 L(60,317) L103,155
Net loss........................................... (30,826) (30,826)
------- -------- -------- --------
BALANCE, DECEMBER 31, 1997........................... L51,073 L112,399 L(91,143) L 72,329
======= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-71
<PAGE> 326
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
1. BUSINESS
Birmingham Cable Corporation Limited, a company incorporated in the United
Kingdom ("UK"), and subsidiaries (the "Company") is principally engaged in the
development, construction, management and operation of cable telecommunications
systems. The Company holds two franchises in Birmingham/Solihull and Wythall,
England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting principles
practiced in the US. The UK Pound exchange rate as of December 31, 1997 was US
$1.65.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997 and have
not been comprehensively revalued for purposes of these consolidated financial
statements since such dates.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are
F-72
<PAGE> 327
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
expensed as incurred. Costs incurred in anticipation of servicing a fully
operating system that will not vary regardless of the number of subscribers are
partially expensed and partially capitalized, based upon the percentage of
average actual or estimated subscribers, whichever is greater, to the total
number of subscribers expected at the end of the Prematurity Period (the
"Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, all of the Company's seven discrete build areas
have completed their Prematurity Period.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 15-40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-10 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Leasehold buildings......................................... term of lease
Fixtures, fittings and equipment............................ 5 years
Computers................................................... 4 years
Vehicles.................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
interest portion being expensed. Payments on operating leases are expensed on a
straight-line basis over the lease term.
F-73
<PAGE> 328
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses. Franchise acquisition and development costs have been
allocated evenly between each build area and are amortized, by build area, on a
straight-line basis, over the lives of the franchises of 15 to 23 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses interest rate exchange agreements ("Swaps"), to manage its
exposure to fluctuations in interest rates. Swaps are matched with either fixed
or variable rate debt and periodic cash payments are accrued on a settlement
basis as an adjustment to interest expense.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying liabilities, reduce the
Company's risks relating to interest rates and, through market value and
sensitivity analysis, maintain a high correlation to the interest expense or
underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to any leveraged instruments (see Note 3).
The credit risks associated with the Company's derivative financial instruments
are controlled through the evaluation and monitoring of the creditworthiness of
the counterparties. Although the Company may be exposed to losses in the event
of nonperformance by the counterparties, the Company does not expect such
losses, if any, to be significant.
3. LONG-TERM DEBT AND PREFERENCE SHARES
In February 1995, a subsidiary of the Company issued 175,000 cumulative
L1.00 redeemable five year term preference shares for a paid up value of L175.0
million. Also in February 1995, the Company entered into a L175.0 million five
year revolving credit facility (the "Birmingham Facility") which provided for
conversion into a five year term loan on March 31, 2000. In March 1997, the
terms of the Birmingham Facility were amended to extend the maturity of the term
loan to December 31, 2005 and to amend the required cash flow levels (as
defined) and certain other terms. Interest rates on the Birmingham Facility are
at the London Interbank Offered Rate ("LIBOR") plus 5/8% to 2 1/4%.
F-74
<PAGE> 329
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
In July 1997, the preference shareholder exercised its option to require
the Company to purchase its shareholding. The Company funded the redemption of
the preference shares with the proceeds from the Birmingham Facility and
restricted cash and settled its five year L175.0 million interest rate exchange
agreement with Barclays Bank PLC. The balance of the Birmingham Facility will be
used, subject to certain restrictions, for capital expenditures and working
capital requirements relating to the build-out of its systems. The preference
shares had an effective dividend rate, including Advanced Corporation Tax
("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit the
Company's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. The Company's three principal shareholders'
right to receive consulting fee payments from the Company has been subordinated
to the banks under the Birmingham Facility. The payment of consulting fees is
restricted until the Company meets certain financial ratio tests under the
Birmingham Facility. The Company has pledged the shares of its material
subsidiaries to secure the Birmingham Facility. Upon a change of control, all
amounts due under the Birmingham Facility become immediately due and payable. On
February 4, 1998, Comcast UK Cable Partners Limited ("Comcast UK"), one the
Company's principal shareholders, entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned subsidiary of NTL
Incorporated. The consummation of the NTL Transaction will not result in a
change of control as defined in the Birmingham Facility.
The Company enters into Swaps as a normal part of its risk management
efforts to limit its exposure to adverse fluctuations in interest rates. Using
Swaps, the Company agrees to exchange, at specified intervals, the difference
between fixed and variable interest amounts calculated by reference to an agreed
upon notional amount. In conjunction with the Birmingham Facility, a subsidiary
of the Company and Barclays Bank PLC entered into a five year L175.0 million
Swap, whereby the subsidiary receives fixed interest at a rate of 8.83% and pays
floating rate interest at the six month LIBOR. The L175.0 million Swap was
settled in July 1997 along with the redemption of the preference shares (see
above). In addition, a subsidiary of the Company entered into a second series of
five year Swaps with three banks. Under the agreements, the subsidiary pays
fixed rate interest at 9.20% and receives floating rate interest at six month
LIBOR, based upon the outstanding notional amount of the Swaps. As of December
31, 1997, the notional amount outstanding on the second series of Swaps was
L149.0 million, and increased to L160.0 million on January 2, 1998. The notional
amounts of interest rate agreements are used to measure interest to be paid or
received and do not represent the amount of exposure to credit loss. While Swaps
represent an integral part of the Company's interest rate risk management
program, their incremental effect on interest expense for the year ended
December 31, 1997 was not significant. The estimated amount to settle the
Company's Swaps was a liability of L7.5 million as of December 31, 1997.
On March 16, 1998, the Company's shareholders loaned L7.0 million to the
Company in the form of Junior Subordinated Debt, as defined in the Birmingham
Facility. The proceeds from this borrowing were used to settle the Swaps
described above. Additionally, on March 16, 1998 a subsidiary of the Company
entered into a L160.0 million notional amount two year Swap with three banks.
Under the terms of this Swap, the subsidiary pays fixed rate interest at 7.23%
and receives floating rate interest at six month LIBOR, based upon the notional
amount.
F-75
<PAGE> 330
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows (L000's):
<TABLE>
<S> <C>
1999............................................... L
2000............................................... 7,000
2001............................................... 14,000
2002............................................... 21,000
</TABLE>
The differences between the carrying amounts and estimated fair value of
the Company's long-term debt was not significant as of December 31, 1997.
Interest rates that are currently available to the Company for debt with similar
terms and remaining maturities are used to estimate fair value for debt issues
for which quoted market prices are not available.
4. LONG-TERM DEBT, DUE TO SHAREHOLDERS
As of December 31, 1997, the Company had outstanding loans from
shareholders of L7.0 million and accrued interest thereon of L492,000. The loans
from shareholders bear interest at a fixed rate of 7.8% and are payable on
demand. Under the terms of the Birmingham Facility, however, principal and
interest on the loans from shareholders cannot be paid until the Birmingham
Facility is repaid. Thus, the loans from shareholders and accrued interest
thereon have been classified as long-term in the Company's consolidated balance
sheet. The carrying value of the loans from shareholders approximates fair value
as of December 31, 1997.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
two of the Company's principal shareholders, Comcast UK and Telewest
Communications plc ("Telewest"), respectively. The Company also has a consulting
agreement with General Cable, the Company's other principal shareholder. The
Company pays a fee to Telewest each year as a contribution to the operating
expenses and capital expenditures of Telewest's Network Service Center, which
provides telephony support to the Company. The Company has a telephony
interconnect agreement with Telewest, whereby certain telephony traffic is
routed via Telewest. These interconnect costs are included in "other" below.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in L000's):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------
1997
------------
<S> <C>
Consulting fees............................................. L1,511
Network Service Center fees................................. 711
Other....................................................... 1,151
------
L3,373
======
</TABLE>
As of December 31, 1997, accounts payable and accrued expenses include L1.4
million, payable to the Company's three principal shareholders, principally for
consulting fees and normal operating expenses paid by the shareholders and their
affiliates on behalf of the Company. As of December 31, 1997, other long-term
liabilities includes L3.9 million, of consulting fees payable to the Company's
three principal shareholders as payment is restricted under the Birmingham
Facility.
F-76
<PAGE> 331
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of property.
However, a valuation allowance has been recorded to fully reserve the deferred
tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as
follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
------------
1997
------------
<S> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 3,253
Differences between book and tax basis of property.......... 7,880
Less: Valuation allowance................................... (11,133)
--------
L
========
</TABLE>
In connection with the Birmingham Facility and the related preference share
arrangement (see Note 3), the Company is obligated to pay ACT on all preference
share dividends. Related ACT for 1997 was L1.4 million, and has been classified
as a component of interest expense in the Company's consolidated statement of
operations. ACT may be carried forward indefinitely to offset potential future
tax liabilities of the Company.
7. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest and preferred stock dividends
of approximately L43.0 million during the year ended December 31, 1997.
The Company incurred capital lease obligations of L4.1 million during the
year ended December 31, 1997.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
System, fixtures, fittings, equipment and vehicles.......... L 1,511
Less: Accumulated depreciation.............................. (5,779)
-------
L13,212
=======
</TABLE>
F-77
<PAGE> 332
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ L 2,699 L 156
1999........................................................ 2,801 156
2000........................................................ 2,778 156
2001........................................................ 2,300 157
2002........................................................ 1,719 154
Thereafter.................................................. 7,710 1,805
-------- -------
Total minimum rental commitments............................ 20,007 L 2,584
=======
Less: Amount representing interest.......................... (4,783)
--------
Present value of minimum rental commitments................. 15,224
Less: Current portion of capital lease obligations.......... (1,685)
--------
Long-term portion of capital lease obligations.............. L 13,539
========
</TABLE>
Operating lease expense for the years ended December 31, 1997 was L169,000.
Included within accounts payable and accrued expenses and other long-term
liabilities as of December 31, 1997 is L570,000 which represents the obligation
incurred by the Company in connection with the termination of a contractual
obligation under an agreement with the local authority to service and maintain
the Company's satellite master antenna television installations in the franchise
area. This liability is noninterest bearing and will be discharged by the
payment of L95,000 annually through 2003. The effect of discounting the
liability is not significant to the Company's financial position or results of
operations.
F-78
<PAGE> 333
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
CABLE LONDON PLC
We have audited the accompanying consolidated balance sheet of Cable London
PLC (a company incorporated in the United Kingdom) and subsidiaries as of
December 31, 1997 and the related consolidated statements of operations,
shareholders' (deficiency) equity and of cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cable London PLC and
subsidiaries as of December 31, 1997 and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE
London, England
February 27, 1998
F-79
<PAGE> 334
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... L 2,718
Accounts receivable, less allowance for doubtful accounts
of L1,762.............................................. 4,792
Other current assets...................................... 2,830
---------
Total current assets.............................. 10,340
---------
PROPERTY AND EQUIPMENT...................................... 235,786
Accumulated depreciation.................................. (55,292)
---------
Property and equipment, net............................... 180,494
---------
DEFERRED CHARGES............................................ 8,073
Accumulated amortization.................................. (3,214)
---------
Deferred charges, net..................................... 4,859
---------
L 195,693
=========
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 19,972
Other current liabilities................................. 2,172
Current portion of long-term debt and capital lease
obligations............................................ 758
---------
Total current liabilities......................... 22,902
---------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 89,727
---------
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION............. 11,751
---------
CONVERTIBLE DEBT AND LOANS FROM SHAREHOLDERS................ 69,017
---------
OTHER LIABILITIES........................................... 2,543
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIENCY) EQUITY
Ordinary shares, L.10 par value--authorized, 100,000,000
shares; issued, 55,572,916 and 55,125,690.............. 5,557
Additional capital........................................ 97,254
Accumulated deficit....................................... (103,058)
---------
Total shareholders' (deficiency) equity................ (247)
---------
L 195,693
=========
</TABLE>
See notes to consolidated financial statements.
F-80
<PAGE> 335
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997
------------
<S> <C>
SERVICE INCOME.............................................. L 52,816
--------
COSTS AND EXPENSES
Operating................................................. 22,084
Selling, general and administrative....................... 23,703
Depreciation and amortization............................. 19,740
--------
65,527
--------
OPERATING LOSS.............................................. (12,711)
INTEREST EXPENSE............................................ 12,692
INVESTMENT INCOME........................................... (235)
--------
NET LOSS.................................................... L(25,168)
========
</TABLE>
See notes to consolidated financial statements.
F-81
<PAGE> 336
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997
------------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... L(25,168)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization.......................... 19,740
Non-cash interest expense.............................. 4,773
Increase in accounts receivable and other current
assets................................................ (618)
(Decrease) in accounts payable and accrued expenses,
other current liabilities and other liabilities....... (135)
--------
Net cash (used in) operating activities.............. (1,408)
--------
FINANCING ACTIVITIES
Proceeds from borrowings.................................. 94,029
Debt acquisition costs.................................... (1,704)
Loans from shareholders................................... 12,000
Repayments of debt........................................ (65,031)
Repayment of capital leases............................... (537)
Issuances of shares....................................... 812
--------
Net cash provided by financing activities............ 39,569
--------
INVESTING ACTIVITIES
Capital expenditures...................................... (38,656)
--------
Net cash (used in) investing activities.............. (38,656)
--------
(DECREASE) IN CASH.......................................... (495)
CASH, BEGINNING OF YEAR..................................... 3,213
--------
CASH, END OF YEAR........................................... L 2,718
========
</TABLE>
See notes to consolidated financial statements.
F-82
<PAGE> 337
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) EQUITY
(IN L000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996...................... L5,513 L96,486 L (77,890) L 24,109
Shares issued................................. 44 768 812
Net loss...................................... (25,168) (25,168)
------ ------- --------- --------
BALANCE, DECEMBER 31, 1997...................... L5,557 L97,254 L(103,058) L (247)
====== ======= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-83
<PAGE> 338
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
1. BUSINESS
Cable London PLC, a company incorporated in the United Kingdom ("UK"), and
subsidiaries (the "Company") is principally engaged in the development,
construction, management and operation of cable telecommunications systems. The
Company holds four franchises covering Camden, Haringey, Hackney/ Islington and
Enfield, England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting principles
practiced in the US. The UK Pound exchange rate as of December 31, 1997 was US
$1.65.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997, and have
not been comprehensively revalued for purposes of these consolidated financial
statements since such dates.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are
F-84
<PAGE> 339
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
expensed as incurred. Costs incurred in anticipation of servicing a fully
operating system that will not vary regardless of the number of subscribers are
partially expensed and partially capitalized, based on the percentage of average
actual or estimated subscribers, whichever is greater, to the total number of
subscribers expected at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, three of the Company's four franchise areas have
completed their Prematurity Period. The remaining Prematurity Period is expected
to terminate in 1998.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-8 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Leased buildings............................................ 40 years
Fixtures, fittings and equipment............................ 5 years
Computers................................................... 4 years
Vehicles.................................................... 3 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
interest portion being expensed. Payments on operating leases are expensed on a
straight-line basis over the lease term.
F-85
<PAGE> 340
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses and debt acquisition costs incurred by the Company in
entering into the London Revolver (see Note 3). Franchise acquisition and
development costs are being amortized on a straight-line basis over periods from
two to fifteen years. Debt acquisition costs are being amortized on a
straight-line basis over the term of the London Revolver of nine years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, including interest rate
exchange agreements ("Swaps") and interest rate collar agreements ("Collars"),
to manage its exposure to fluctuations in interest rates.
Swaps and Collars are matched with either fixed or variable rate debt and
periodic cash payments are accrued on a settlement basis as an adjustment to
interest expense.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying liabilities, reduce the
Company's risks relating to interest rates and, through market value and
sensitivity analysis, maintain a high correlation to the interest expense or
underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Note 3). The
credit risks associated with the Company's derivative financial instruments are
controlled through the evaluation and monitoring of the creditworthiness of the
counterparties. Although the Company may be exposed to losses in the event of
nonperformance by the counterparties, the Company does not expect such losses,
if any, to be significant.
3. LONG-TERM DEBT
In June 1995, the Company entered into a L60.0 million revolving credit
facility (the "London Facility") with various banks. The London Facility had a
two year term and an interest rate at the London Interbank
F-86
<PAGE> 341
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Offered Rate ("LIBOR") plus 2 1/2%. In April 1997, the amount available under
the London Facility was increased to L65.0 million.
In May 1997, the Company entered into a L170.0 million revolving credit
facility (the "London Revolver") with various banks, which converts into a five
year term loan on June 30, 2001. Interest rates on the London Revolver are at
LIBOR plus 1/2% to 2 3/8%. In May 1997, the Company repaid all amounts
outstanding under the London Facility with proceeds from borrowings under the
London Revolver. The balance of the London Revolver will be used, subject to
certain restrictions, for capital expenditures and working capital requirements
relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit the
Company's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's two principal shareholders' rights to receive consulting fee
payments from the Company has been subordinated to the banks under the London
Revolver. The payment of consulting fees is restricted until the Company meets
certain financial ratio tests under the London Revolver. In addition, the
Company's two principal shareholders' shares in the Company have been pledged to
secure the London Revolver. Upon a change of control, all amounts due under the
London Revolver become immediately due and payable. On February 4, 1998, Comcast
UK Cable Partners Limited ("Comcast UK"), one the Company's principal
shareholders, entered into a definitive agreement to amalgamate (the "NTL
Transaction") with a wholly owned subsidiary of NTL Incorporated. The
consummation of the NTL Transaction will not result in a change of control as
defined in the London Revolver.
The Company enters into Swaps and Collars as a normal part of its risk
management efforts to limit its exposure to adverse fluctuations in interest
rates. Using Swaps, the Company agrees to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by reference
to an agreed upon notional amount. Collars limit the Company's exposure to and
benefits from interest rate fluctuations on variable rate debt to within a
certain range of interest rates. In June 1997, the Company entered into a series
of four year interest Swaps with three banks. Under the agreements, the Company
pays fixed rate interest at 7.34% and receives floating rate interest at three
month LIBOR, based upon the outstanding notional amount of the Swaps. As of
December 31, 1997, the notional amount outstanding on the Swaps was L44.5
million and increased to L49.5 million on January 7, 1998. Also in June 1997,
the Company entered into a Collar which limits the interest rate on the notional
amount to between 6% and 9%. As of December 31, 1997, the notional amount
outstanding on the Collar was L22.3 million and increased to L24.8 million on
January 7, 1998. The notional amounts of interest rate agreements and interest
rate collar agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. While Swaps and Collars
represent an integral part of the Company's interest rate risk management
program, their incremental effect on interest expense for the year ended
December 31, 1997 was not significant. The estimated amount to settle the
Company's Swaps and Collar was L1.5 million as of December 31, 1997.
Also included in long-term debt is a mortgage note payable with an
outstanding balance of L753,000 as of December 31, 1997, payable in monthly
installments through 2002 which is secured by property of the Company. The
mortgage note bears interest at a fixed rate of 9.79%.
F-87
<PAGE> 342
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows (L000's):
<TABLE>
<S> <C>
1999................................................ L
2000................................................
2001................................................ 2,225
2002................................................ 8,900
</TABLE>
The differences between the carrying amounts and estimated fair value of
the Company's long-term debt was not significant as of December 31, 1997.
Interest rates that are currently available to the Company for debt with similar
terms and remaining maturities are used to estimate fair value for debt issues
for which quoted market prices are not available.
4. CONVERTIBLE DEBT AND LOANS FROM SHAREHOLDERS
As of December 31, 1997, the Company had outstanding convertible debt due
to shareholders of L42.0 million and outstanding loans from shareholders of
L15.0 million. The convertible debt and loans from shareholders bear interest at
2% above the base lending rate of Barclays Bank PLC (9.25% effective rate as of
December 31, 1997) and are payable on demand. Accrued interest on the
convertible debt and loans from shareholders is L12.0 million as of December 31,
1997. Under the terms of the London Revolver, principal and interest on the
convertible debt and loans from shareholders cannot be paid until the London
Revolver is repaid. Accordingly, the convertible debt, loans from shareholders
and accrued interest thereon has been classified as long-term convertible debt
and other in the Company's consolidated balance sheet. The convertible debt,
along with accrued interest thereon, is convertible into the Company's ordinary
shares at L2.00 per share. Interest expense on the convertible debt and loans
from shareholders was L4.8 million, during the year ended December 31, 1997. The
carrying value of the convertible debt and loans from shareholders approximates
fair value as of December 31, 1997.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
the Company's two principal shareholders, Comcast UK and Telewest Communications
plc ("Telewest"), respectively. The Company pays a fee to Telewest each year as
a contribution to the operating expenses and capital expenditures of Telewest's
Network Service Center, which provides telephony support to the Company.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in L000's):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1997
-----------
<S> <C>
Consulting fees............................................. L1,077
Network Service Center fees................................. 521
Other....................................................... 355
------
L1,953
======
</TABLE>
As of December 31, 1997, accounts payable and accrued expenses include
L176,000 million, payable to the Company's two principal shareholders,
principally for consulting fees and normal operating expenses paid by the
shareholders and their affiliates on behalf of the Company. As of December 31,
1997 other long-term
F-88
<PAGE> 343
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
liabilities includes L2.5 million of consulting fees and interest payable to the
Company's two principal shareholders as payment is restricted under the London
Revolver.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of property.
However, a valuation allowance has been recorded to fully reserve the deferred
tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as
follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 17,692
Differences between book and tax basis of property.......... 10,426
Other....................................................... (459)
Less: Valuation allowance................................... (27,659)
--------
L
========
</TABLE>
7. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately L7.4 million
during the year ended December 31, 1997.
The Company incurred capital lease obligations of L4.8 million during the
year ended December 31, 1997.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1997
-----------
<S> <C>
System, fixtures, fittings, equipment and vehicles.......... L13,040
Less: Accumulated depreciation.............................. (2,836)
-------
L10,204
=======
</TABLE>
F-89
<PAGE> 344
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998........................................................ L 1,550 L 902
1999........................................................ 2,036 496
2000........................................................ 2,078 181
2001........................................................ 2,313 148
2002........................................................ 1,457 146
Thereafter.................................................. 7,727 955
------- ------
Total minimum rental commitments............................ 17,161 L2,828
======
Less: Amount representing interest.......................... (4,678)
-------
Present value of minimum rental commitments................. 12,483
Less: Current portion of capital lease obligations.......... (732)
-------
Long-term portion of capital lease obligations.............. L11,751
=======
</TABLE>
Operating lease expense for the years ended December 31, 1997 was L919,000.
F-90
<PAGE> 345
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
COMTEL UK FINANCE B.V.
We have audited the accompanying combined balance sheet of ComTel UK
Finance B.V. and its subsidiaries ("the Company") as of December 31, 1997 and
the related combined statement of operations, shareholders' equity and cash
flows for the year ended December 31, 1997. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United Kingdom which are similar to those in the United States
of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company as of
December 31, 1997 and the combined results of its operations and its combined
cash flows for the year ended December 31, 1997 in conformity with generally
accepted accounting principles in the United States of America.
DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
BRACKNELL, ENGLAND
June 5, 1998
(July 16, 1998 as to Note 10)
F-91
<PAGE> 346
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS OF
COMTEL UK FINANCE B.V.
We have audited the combined balance sheet of ComTel UK Finance B.V. and
its subsidiaries ("the Company") as of December 31, 1996 and the related
combined statement of operations, shareholders' equity and cash flows for the
year ended December 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit. We did not
audit the combined financial statements of Telecential Communications (UK)
Limited and Telecential Communications (Canada) Limited, both 50% owned entities
(collectively "Telecential"). Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Telecential, is based solely on the report of the other
auditors.
We conducted our audit in accordance with United Kingdom generally accepted
auditing standards which do not differ in any material respect from auditing
standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the combined financial position of the Company as of December 31, 1996
and the combined results of its operations and its combined cash flows for the
year ended December 31, 1996 in conformity with generally accepted accounting
principles in the United States of America.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
LONDON, ENGLAND
June 5, 1998, except as to Note 10, as to
which the date is July 16, 1998
F-92
<PAGE> 347
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Cable television............................................ 5,680 27,192
Residential telephone....................................... 3,247 23,203
Business telecommunications................................. 214 893
------- -------
9,141 51,288
------- -------
OPERATING COSTS AND EXPENSES
Telephone................................................... 1,247 4,461
Programming................................................. 3,659 17,730
Selling, general and administrative......................... 11,501 33,911
Depreciation and amortisation............................... 11,211 32,604
------- -------
27,618 88,706
------- -------
OPERATING LOSS.............................................. (18,477) (37,418)
Interest income............................................. 1,859 2,041
Interest expense............................................ (10,485) (27,044)
Loss from equity investment................................. (15,224) (6,125)
Foreign exchange gain (note 7).............................. 7,456 6,549
------- -------
LOSS BEFORE INCOME TAX EXPENSE.............................. (34,871) (61,997)
Income tax expense (note 3)................................. -- (100)
------- -------
NET LOSS.................................................... (34,871) (62,097)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-93
<PAGE> 348
COMTEL UK FINANCE B.V.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... 9,977 10,119
Trade receivables (net of allowance for doubtful accounts of
L883 and L4,263 at December 31, 1996 and 1997
respectively)............................................. 1,754 5,895
Other assets................................................ 1,290 12,541
Advance to Telecential...................................... 46,563 --
Property, plant and equipment, net (note 4)................. 89,339 425,936
Equity investment in Telecential (note 5)................... 37,338 --
Intangible assets, net (note 6)............................. 120,962 210,573
------- -------
TOTAL ASSETS...................................... 307,223 665,064
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable............................................ 5,321 20,036
Other liabilities........................................... 13,445 49,532
Debt and capital lease obligations (note 7)................. 182,757 487,749
Loan from Parent (note 7)................................... 51,129 69,141
Shareholders' equity (note 8)............................... 54,571 38,606
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ 307,223 665,064
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-94
<PAGE> 349
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1996
AND 1997
-------------------
L
(IN THOUSANDS)
<S> <C>
BALANCE AT DECEMBER 31, 1995................................ (3,570)
Net loss.................................................... (34,871)
Capital contributions from shareholders..................... 93,012
-------
BALANCE AT DECEMBER 31, 1996................................ 54,571
Net loss.................................................... (62,097)
Capital contributions from shareholders..................... 46,132
-------
BALANCE AT DECEMBER 31, 1997................................ 38,606
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-95
<PAGE> 350
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1997
-------- --------
L L
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... (34,871) (62,097)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortisation............................. 11,211 32,604
Loss from equity investment............................... 15,224 6,125
Foreign exchange gain..................................... (7,456) (6,549)
Provision for bad debt.................................... 817 841
Change in operating assets and liabilities:
Change in trade receivables............................... (2,011) (2,458)
Change in other assets.................................... 2,273 58
Change in accounts payable................................ (2,609) 3,196
Change in other liabilities............................... 3,252 23,166
Other....................................................... (1,274) 613
-------- --------
Net cash used in operating activities....................... (15,444) (4,501)
-------- --------
Cash flows from investing activities:
Cash invested in property, plant and equipment............ (51,456) (118,033)
Proceeds from disposition of assets....................... -- 869
Acquisition of Telecential, net of cash received.......... -- (117,024)
Acquisition of Coventry, net of cash received............. (3,949) --
Advances to Telecential................................... (40,411) (15,893)
-------- --------
Net cash used in investing activities....................... (95,816) (250,081)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt............................ 49,180 301,048
Repayment of debt......................................... (22,086) (30,000)
Repayment of advances..................................... -- (62,456)
Capital contributions from shareholders................... 93,012 46,132
-------- --------
Net cash provided by financing activities................... 120,106 254,724
-------- --------
Net increase in cash and cash equivalents................... 8,846 142
Cash and cash equivalents at beginning of year.............. 1,131 9,977
-------- --------
Cash and cash equivalents at end of year.................... 9,977 10,119
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-96
<PAGE> 351
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. THE COMPANY
ComTel UK Finance B.V. (the "Company") is a holding company to be
incorporated in The Netherlands to hold the United Kingdom cable assets of
Vision Networks N.V. ("Vision Networks"). These assets comprise United Kingdom
subsidiaries which have exclusive licenses to operate a cable television and
telecommunications business through partnerships and subsidiaries focused on
certain franchise areas located north and east of Birmingham and north and west
of London, England.
References to Shareholders in these financial statements are to the
subscribers to the Company.
All amounts herein are presented in thousands in pounds sterling ("L")
unless otherwise noted.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's combined financial statements have been prepared in
accordance with United States of America generally accepted accounting
principles.
The financial statements include the results of the companies acquired by
Vision Networks in 1995 and 1996. These companies include Vision Networks UK
Holding B.V., Vision Networks (UK) Holdings Limited, Vision Network (UK) I
Limited, Vision Network (UK) II Limited, Vision Networks Canada Limited, Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited. In addition, the financial statements
reflect the 50% ownership position in Telecential Communications (UK) Limited
and Telecential Communications (Canada) Limited (collectively "Telecential") on
the equity basis through May 27, 1997, being the date of acquisition of the
remaining 50% interest, and 100% on a combined basis for the remainder of 1997.
Principles of Combination -- The financial statements combine the accounts
of the Company and those of all majority owned subsidiaries for the two year
period ended December 31, 1997. The subsidiaries are under common ownership and
common management. Investments in more than 20% owned affiliates are accounted
for on the equity method. All significant intercompany accounts and transactions
have been eliminated.
Cable System Costs and Expenses -- The Company accounts for costs and
expenses applicable to the construction and operation of its cable system under
Statement of Financial Accounting Standards ("SFAS") No. 51, "Financial
Reporting by Cable Television Companies". Costs and expenses incurred in each
franchise during the set up period of the cable system have been capitalised in
full. Certain expenses incurred during the prematurity period are apportioned
between capital and revenue on the basis of the average number of subscribers as
a fraction of the number of subscribers estimated at the end of the prematurity
period. The prematurity period is deemed to run from when the first subscriber
is connected to the system to the earlier of three years or when the number of
cable television and telephony subscribers represents an appropriate percentage
penetration of the number of homes passed.
Revenue Recognition -- Revenue is recognised as services are delivered.
Initial connection fees are recognized in full upon installation to the
extent of direct selling costs incurred.
Initial installation costs for subscribers are capitalised and written off
over a period of 8 years. Subsequent connections are expensed as incurred.
Income Tax Expense -- Deferred tax assets and liabilities are recognised
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
F-97
<PAGE> 352
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse. A valuation allowance
is raised against a deferred tax asset where it is more likely than not some
portion of the deferred tax asset will not be realised.
Franchise Costs -- Costs of successful franchise applications are
capitalised as intangible assets and amortised over a period of 20 years. Costs
of unsuccessful applications are expensed as incurred.
Goodwill -- Goodwill arising on the acquisition of subsidiaries is
amortised on a straight line basis over twenty years.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation on equipment other than cable infrastructure is computed on a
straight line basis using estimated useful lives of five to ten years. Cable
infrastructure is depreciated over twenty years. Leasehold improvements are
depreciated on a straight line basis over the lease periods.
Cash and Cash Equivalents -- Cash and cash equivalents include highly
liquid investments with original maturity of three months or less that are
readily convertible to cash.
Foreign Currencies -- The primary economic environment in which the Company
operates is the United Kingdom and hence its functional and reporting currency
is the United Kingdom pound sterling. Transactions in foreign currencies are
recorded using the rate of exchange in effect on the date of the transaction or
at the forward rate if the transaction has been hedged. Monetary assets and
liabilities denominated in foreign currencies are translated using the rate of
exchange in effect on the balance sheet date and gains or losses on translation
are included in the statement of operations.
Leasing Commitments -- Assets held under finance lease contracts are
capitalised in the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligation is charged to expense over the
period of the lease and represents a constant proportion of the balance of
capital repayments outstanding. Rentals paid under operating leases are charged
to expense over the lease term.
Pension Costs -- The Company operates a defined contribution pension plan
for eligible employees and contributes up to specified limits to a third party
plan of the employee's choice. Pension costs totalled L85 and L332 in the years
ended December 31, 1996 and 1997, respectively.
Use of Estimates -- The preparation of financial statements in conformity
with United States of America generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Concentration of Credit Risk and Market Risk -- The Company operates
predominantly in one industry segment, the provision of cable television and
telecommunications services in certain areas of England. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base. Ongoing credit
evaluations of customers' financial condition are performed and generally, no
collateral is required. The Company maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded management's
estimates. No single customer accounts for 10% or more of combined revenues.
Fair Value of Financial Instruments -- Financial instruments are defined as
cash or contracts relating to the receipt, delivery or exchange of financial
instruments. Except as otherwise noted, fair value approximates the carrying
value of such instruments.
F-98
<PAGE> 353
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAX EXPENSE
No provision for deferred taxation has been made due to operating losses
incurred to date in the Company. The Company has net tax operating losses
carried forward in the United Kingdom and The Netherlands of approximately L175
million at December 31, 1997.
The operating losses have an unlimited carry forward period under United
Kingdom tax law (subject to restrictions on a loss carried forward where there
is a change in group ownership and a major change in the nature or conduct of
the business), but are limited in their use to the type of business which
generated the loss. The operating losses available in The Netherlands are also
subject to an unlimited carry forward under The Netherlands tax law (again
subject to restrictions where there is a change in group ownership).
Differences between the tax benefit recognised in the financial statements
and the expected tax benefit for the Company at the United Kingdom and The
Netherlands statutory rate of 31.5% (1996: 33%) and 35%, respectively, are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
Tax benefit of net losses at statutory rate.............. (11,716) (20,532)
Non-deductible expenses.................................. (103) 755
Tax benefit of operating losses not recognised
currently.............................................. 11,819 19,877
------- -------
Income tax expense....................................... -- 100
======= =======
Deferred tax assets relating to:
Net losses............................................... 17,976 56,331
Valuation allowance...................................... (9,516) (23,265)
------- -------
8,460 33,066
Deferred tax liabilities relating to:
Property, plant and equipment............................ (8,460) (33,066)
------- -------
Deferred tax per balance sheet........................... -- --
======= =======
</TABLE>
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, the level of
historical taxable losses, and tax planning strategies in making its assessment
as to the appropriateness of the reported valuation allowance.
The tax charge for the year represents current taxation on those United
Kingdom profits against which United Kingdom group relief cannot be offset.
F-99
<PAGE> 354
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and comprises:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1996 1997
------ -------
L L
(IN THOUSANDS)
<S> <C> <C>
Land and buildings and improvements....................... 4,835 13,982
Plant and equipment....................................... 86,554 453,373
Set-up and prematurity costs.............................. 6,748 33,737
------ -------
98,137 501,092
Less accumulated depreciation............................. (8,798) (75,156)
------ -------
89,339 425,936
====== =======
</TABLE>
The Company leases certain plant and equipment under arrangements accounted
for as capital leases. The original cost of assets held under these arrangements
was L2,558 and L17,510 at December 31, 1996 and 1997, respectively. Accumulated
depreciation charged against these assets was L734 and L7,047 at December 31,
1996 and 1997, respectively.
Depreciation expense totaled L4,780 and L23,425 in the years ended December
31, 1996 and 1997, respectively, of which L537 and L2,770, respectively,
represented depreciation on assets held under capital lease arrangements.
5. ACQUISITIONS
In April 1996, the Company acquired 87.75% of ComTel Coventry Limited
("Coventry") for cash consideration of L3,973. The acquisition was accounted for
using the purchase method of accounting. The excess of consideration over fair
value of net assets acquired was L11,829, which is included in goodwill.
The 50% interest in Telecential which was not owned was acquired on May 27,
1997 for cash consideration of L123,191. The acquisition was accounted for using
the purchase method of accounting. The excess of fair value of net assets
acquired at the date of acquisition was L90,553 which is included in goodwill.
Accordingly, operating results of Telecential have been included in the combined
statement of operations from the date of acquisition of the remaining 50%
interest.
The unaudited pro forma combined historical results of the Company, as if
the acquisitions had occurred as of January 1, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
Revenue.................................................. 47,555 72,271
Operating cost and expenses.............................. 89,368 119,036
------- -------
Operating loss........................................... (41,813) (46,765)
Loss before income taxes................................. (63,874) (74,248)
Net loss................................................. (63,971) (74,348)
</TABLE>
The unaudited pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been completed as of the
beginning of each of the fiscal periods presented, nor are they necessarily
indicative of future combined results.
F-100
<PAGE> 355
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Following the May 27, 1997 acquisition of the 50% interest in Telecential
the operations of both Telecential and the Company were combined. This involved
rationalising operations throughout the Company to (i) consolidate customer
operations and combine processes, practices and systems in order to provide
"World Class" customer services; (ii) rebrand the Company under the ComTel brand
name; and (iii) reduce staff and pay related severance costs. The initial
accrued liability in respect of these costs comprised:
<TABLE>
<CAPTION>
L
(IN THOUSANDS)
--------------
<S> <C>
Consolidation of customer operations........................ 1,838
Rebranding as ComTel........................................ 450
Severance costs............................................. 300
-----
2,588
=====
</TABLE>
All of the above was contracted for in 1997 and has therefore been expensed
within operating costs and expenses in the combined statement of operations.
L2,316 of these costs had been incurred by December 31, 1997 and the remaining
L272 was spent in the first quarter of 1998.
6. INTANGIBLE ASSETS
Intangible assets are stated at cost and comprise:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
Goodwill................................................. 128,658 220,155
Franchise costs.......................................... -- 7,293
------- -------
128,658 227,448
Less accumulated amortisation............................ (7,696) (16,875)
------- -------
120,962 210,573
======= =======
</TABLE>
Amortization expense totaled L6,431 and L9,179 in the years ended December
31, 1996 and 1997, respectively.
7. DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank..................................... 181,314 463,545
Other.................................................... -- 2,516
Capital lease obligations................................ 1,443 21,688
------- -------
182,757 487,749
Loan from Parent......................................... 51,129 69,141
------- -------
233,886 556,890
======= =======
</TABLE>
The note payable to the bank bears interest at a rate of LIBOR (7.438% at
December 31, 1997) plus 15 basis points. The loan is repayable in full in 1998.
The loan is collateralised by a guarantee from the ultimate parent company
Koninklijke PTT Nederland N.V. The loan from parent represents a Dutch guilder
denominated loan from Vision Networks and bears interest at a rate of LIBOR as
of December 31, 1997, and
F-101
<PAGE> 356
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
has no fixed repayment term. Debt obligations consisting of repayments on loans,
excluding capital lease obligations, are all due 1998.
Future minimum lease payments on capital lease obligations are due in
future years in the following amounts:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1997
--------------
L
(IN THOUSANDS)
<S> <C>
1998.................................................... 4,073
1999.................................................... 2,878
2000.................................................... 2,288
2001.................................................... 9,155
2002.................................................... 1,454
Thereafter.............................................. 1,840
------
21,688
Imputed interest........................................ 3,247
------
24,935
======
</TABLE>
Cash paid for interest during 1996 and 1997 was L10,874 and L27,726,
respectively.
8. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
VISION
VISION NETWORKS VISION
NETWORKS (UK) NETWORKS
UK HOLDING HOLDINGS SERVICES UK
B.V. LIMITED LIMITED TOTAL
---------- -------- ----------- -------
L L L L
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996...................... (1,363) (2,207) -- (3,570)
Net loss........................................ (7,547) (27,190) (134) (34,871)
Capital contributions........................... 93,012 -- -- 93,012
------- ------- ---- -------
BALANCE AT DECEMBER 31, 1996.................... 84,102 (29,397) (134) 54,571
Net loss........................................ (13,079) (48,888) (130) (62,097)
Capital contributions........................... 46,132 -- -- 46,132
------- ------- ---- -------
BALANCE AT DECEMBER 31, 1997.................... 117,155 (78,285) (264) 38,606
======= ======= ==== =======
</TABLE>
Vision Networks UK Holding B.V. consolidates all of the ComTel group of
companies, whilst Vision Networks (UK) Holdings Limited combines all of the
Telecential group of companies. Vision Networks Services UK Limited is a Dutch
holding company which provided management services to all of the companies in
each of the two groups.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases business offices and uses certain equipment under lease
agreements accounted for as operating leases. Rental expense under such
arrangements amounted to L1,427 and L4,510 in the years ended December 31, 1996
and 1997 respectively.
F-102
<PAGE> 357
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under non cancellable operating leases as of
December 31, 1997 are summarised as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1997
--------------
L
(IN THOUSANDS)
<S> <C>
1998.................................................... 1,533
1999.................................................... 2,686
2000.................................................... --
2001.................................................... --
2002.................................................... --
Thereafter.............................................. 1,608
-----
5,827
=====
</TABLE>
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced by leases on other properties.
Milestones
The Company is obligated under the terms of its existing licences, and
under the milestone requirements of Local Delivery Licences ("LDL's") to
construct cable systems passing a predefined number of premises. Should the
Company fail to achieve these milestones, without licence modifications, the
Director General could commence proceedings to require compliance. Similarly the
Independent Television Commission ("ITC") may commence proceedings to require
compliance with the build milestones in the LDL's.
If the Company is unable to comply, its licence, in respect of which
milestones have not been met, could be revoked and awarded to other cable
operators, which could have a material adverse effect on the Company.
As of December 31, 1997 the Company was in compliance with its milestone
obligations.
10. SUBSEQUENT EVENTS
On June 11, 1998 the Company was incorporated in The Netherlands as
contemplated in note 1.
On June 16, 1998 NTL Group Limited ("NTL"), a subsidiary of NTL
Incorporated, acquired the entire issued share capital of the UK subsidiaries
which form part of the Company's combined group as presented in these financial
statements (the "ComTel Shares"). These UK subsidiaries comprised Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited.
On the same date an undertaking was entered into by NTL to acquire the
entire issued share capital of ComTel Limited, Heartland Cablevision (UK)
Limited and Heartland Cablevision II (UK) Limited, together with all interests
in the Telecommunications Partnership and LP5 and LP6 (the "Telecential
Assets"). The Telecential Assets form part of the Company's combined group as
presented in these financial statements. The completion of the acquisition of
the Telecential Assets is subject to compliance with certain obligations on all
parties to the sale before March 15, 1999 or, subject to specific exceptions,
December 31, 2002.
F-103
<PAGE> 358
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
(UNAUDITED)
------------------
1997 1998
------- -------
L L
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Cable television............................................ 4,921 21,534
Residential telephone....................................... 3,511 19,390
Business telecommunications................................. 274 2,570
------- -------
8,706 43,494
------- -------
OPERATING COSTS AND EXPENSES
Telephone................................................... 1,065 5,699
Programming................................................. 3,393 12,924
Selling, general and administrative......................... 7,640 24,140
Depreciation and amortisation............................... 8,897 25,969
------- -------
20,995 68,732
------- -------
OPERATING LOSS.............................................. (12,289) (25,238)
Interest income............................................. 412 665
Interest expense............................................ (8,726) (19,877)
Loss from equity investment................................. (9,312) --
Foreign exchange gain (loss)................................ 3,876 (7,639)
------- -------
LOSS BEFORE INCOME TAX EXPENSE.............................. (26,039) (52,089)
Income tax expense.......................................... -- --
------- -------
NET LOSS.................................................... (26,039) (52,089)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-104
<PAGE> 359
COMTEL UK FINANCE B.V.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998
(UNAUDITED)
--------------
L
(IN THOUSANDS)
<S> <C>
ASSETS
Cash and cash equivalents................................... 11,517
Trade receivables (net of allowance for doubtful accounts of
L3,854 at June 30, 1998).................................. 11,493
Other assets................................................ 114,074
Property, plant and equipment, net.......................... 295,132
Intangible assets, net...................................... 156,923
-------
Total assets...................................... 589,139
=======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
Accounts payable............................................ 23,248
Other liabilities........................................... 60,798
Debt and capital lease obligations.......................... 309,706
Shareholders' equity........................................ 195,387
-------
Total liabilities and shareholders' equity........ 589,139
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-105
<PAGE> 360
COMTEL UK FINANCE B.V.
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
JUNE 30, 1998
-----------------
(UNAUDITED)
L
(IN THOUSANDS)
<S> <C>
BALANCE AT DECEMBER 31, 1997................................ 38,606
Capital contributions....................................... 208,870
Net loss.................................................... (52,089)
-------
BALANCE AT JUNE 30, 1998.................................... 195,387
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-106
<PAGE> 361
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIODS ENDED
JUNE 30
--------------------
(UNAUDITED)
1997 1998
-------- --------
L L
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... (26,039) (52,089)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortisation............................. 8,897 25,969
Loss from equity investment............................... 9,312 --
Foreign exchange (gain) loss.............................. (3,876) 7,639
Change in operating assets and liabilities:
Change in trade receivables............................... (2,317) (12,432)
Change in other assets.................................... 5,815 5,899
Change in accounts payable................................ 12,311 19,061
Change in other liabilities............................... (9,850) 10,312
Other....................................................... (2,461) 654
-------- --------
Net cash used in/provided by operating activities........... (8,208) 5,013
-------- --------
Cash flows from investing activities:
Cash invested in property, plant and equipment............ (45,798) (44,533)
Proceeds from sale of ComTel Shares, net of cash on
hand................................................... -- 267,652
Acquisition of Telecential, net of cash received.......... (117,024) --
Advances to Telecential................................... (15,893) --
-------- --------
Net cash used in/provided by investing activities........... (178,715) 223,119
-------- --------
Cash flows from financing activities:
Proceeds from the issuance of debt........................ 222,433 280,712
Repayment of debt......................................... (1,443) (535,535)
Repayment of advances..................................... (62,456) --
Capital contributions from shareholders................... 33,786 28,089
-------- --------
Net cash provided by/used in financing activities........... 192,320 (226,734)
-------- --------
Net increase in cash and cash equivalents................... 5,397 1,398
Cash and cash equivalents at beginning of period............ 9,977 10,119
-------- --------
Cash and cash equivalents at end of period.................. 15,374 11,517
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-107
<PAGE> 362
COMTEL UK FINANCE B.V.
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
1. THE COMPANY
ComTel UK Finance B.V. (the "Company") is a holding company incorporated in
The Netherlands to hold the United Kingdom cable assets of Vision Networks N.V.
("Vision Networks"). These assets comprise United Kingdom subsidiaries which
have exclusive licences to operate a cable television and telecommunications
business through partnerships and subsidiaries focused on certain franchise
areas located north and east of Birmingham and north and west of London,
England.
References to Shareholders in these financial statements are to the
subscribers to the Company.
The preparation of unaudited financial statements in conformity with United
States of America generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
These unaudited financial statements are presented on a basis which is
consistent with the audited financial statements included elsewhere, herein.
The amounts pertaining to the unaudited combined financial statements are
presented in thousands in pounds sterling ("L").
2. SUPPLEMENTAL UNAUDITED PRO FORMA INFORMATION
The following supplemental unaudited pro forma information includes 100% of
the results of Vision Networks UK Holding B.V., Vision Networks (UK) Holdings
Limited, Vision Networks (UK) I Limited, Vision Networks (UK) II Limited, Vision
Networks Canada Limited, Andover Cablevision Limited, Oxford Cable Limited,
Stafford Communications Limited, Wessex Cable Limited, ComTel Coventry Limited,
ComTel Cable Services Limited, Lichfield Cable Communications Limited, Tamworth
Cable Communications Limited, Vision Networks Services UK Limited, and
Telecential Communications (UK) Limited and Telecential Communications (Canada)
Limited (collectively "Telecential") on a pro forma basis for the six months
ended June 30, 1997 as if Telecential had been acquired as of January 1, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
----------------
L
(IN THOUSANDS)
<S> <C>
Revenue..................................................... 34,063
Operating costs and expenses................................ (59,852)
-------
Operating loss.............................................. (25,789)
Interest income............................................. 544
Interest expense............................................ (11,278)
Foreign exchange gain....................................... 3,876
-------
Loss before income tax expense.............................. (32,647)
-------
Income tax expense.......................................... (75)
-------
Net loss.................................................... (32,722)
=======
</TABLE>
The supplemental unaudited pro forma information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations would have been had Telecential operated as part of the
Company for the six months ended June 30, 1997, nor is it necessarily indicative
of the Company's future operating results or combined financial position.
F-108
<PAGE> 363
COMTEL UK FINANCE B.V.
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has accounted for the acquisition of Telecential using the
purchase method of accounting under United States of America generally accepted
accounting principles. Accordingly, the purchase consideration in the
acquisition has been allocated to the assets acquired and liabilities assumed
with any excess being allocated to goodwill and amortised over 20 years.
The six months ended June 30, 1997 supplemental unaudited pro forma
information includes estimates made by the Company and assumptions that it
believes to be reasonable.
The supplemental unaudited pro forma information reflects the following:
1. The actual results of operations for the Company for the six month
period ended June 30, 1997.
2. The results of operations for Telecential for the six month period
ended June 30, 1997 as if Telecential had been acquired January 1, 1997.
3. Amortisation of goodwill based on purchase price allocation as if
Telecential had been acquired January 1, 1997.
4. Interest expense related to loans incurred to finance the
acquisition of Telecential as if the loans had been outstanding since
January 1, 1997.
5. The elimination of intercompany income and expenses as if
Telecential had been acquired January 1, 1997.
3. SUBSEQUENT EVENTS
On June 16, 1998 NTL Group Limited ("NTL"), a subsidiary of NTL
Incorporated, acquired the entire issued share capital of the UK subsidiaries
which form part of the Company's combined group as presented in these financial
statements (the "ComTel Shares"). These UK subsidiaries comprised Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited.
On the same date an undertaking was entered into by NTL to acquire the
entire issued share capital of ComTel Limited, Heartland Cablevision (UK)
Limited and Heartland Cablevision II (UK) Limited, together with all interests
in the Telecommunications Partnership and LP5 and LP6 (the "Telecential
Assets"). The Telecential Assets form part of the Company's combined group as
presented in these financial statements. The completion of the acquisition of
the Telecential Assets is subject to compliance with certain obligations on all
parties to the sale before March 15, 1999 or, subject to specific exceptions,
December 31, 2002.
F-109
<PAGE> 364
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED AND
TELECENTIAL COMMUNICATIONS (UK) LIMITED
We have audited the accompanying combined balance sheet of Telecential
Communications (Canada) Limited and Telecential Communications (UK) Limited
(collectively "Telecential") as of December 31, 1996 and the related combined
statement of operations, shareholders' equity and cash flows for the sixteen
month period ended December 31, 1996. The companies are under common ownership
and common management. These combined financial statements are the
responsibility of the Telecential management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom which are similar to those in the United States
of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Telecential as of
December 31, 1996 and the combined results of their operations and their
combined cash flows for the sixteen month period ended December 31, 1996 in
conformity with generally accepted accounting principles in the United States of
America.
DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
BRACKNELL, ENGLAND
June 5, 1998
(July 16, 1998 as to note 9)
F-110
<PAGE> 365
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOUR MONTHS
SIXTEEN MONTHS YEAR ENDED ENDED
ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
-------------------- ----------------- -----------------
L L L
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Cable television....................... 26,829 21,196 5,633
Residential telephone.................. 20,273 16,363 3,910
Business telecommunications............ 982 855 127
------- ------- ------
48,084 38,414 9,670
------- ------- ------
OPERATING COSTS AND EXPENSES
Telephone.............................. 8,370 6,880 1,490
Programming............................ 15,346 12,557 2,789
Selling, general and administrative.... 28,709 23,125 5,584
Depreciation and amortisation.......... 18,199 14,660 3,539
------- ------- ------
70,624 57,222 13,402
------- ------- ------
OPERATING LOSS......................... (22,540) (18,808) (3,732)
Interest income........................ 288 207 81
Interest expense....................... (13,372) (11,834) (1,538)
Other income........................... 83 83 --
------- ------- ------
LOSS BEFORE INCOME TAX EXPENSE......... (35,541) (30,352) (5,189)
Income tax expense (note 3)............ (129) (97) (32)
------- ------- ------
NET LOSS............................... (35,670) (30,449) (5,221)
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-111
<PAGE> 366
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AT
DECEMBER 31,
1996
--------------
L
(IN THOUSANDS)
<S> <C>
ASSETS
Cash and cash equivalents................................... 6,501
Trade receivables (net of allowance for doubtful accounts of
L2,100 at December 31, 1996).............................. 3,299
Other assets................................................ 2,319
Property, plant and equipment, net (note 4)................. 222,157
Investments (note 5)........................................ 969
Franchise costs less accumulated amortisation of L1,109 at
December 31, 1996......................................... 6,187
-------
Total assets................................................ 241,432
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
Accounts payable............................................ 12,521
Other liabilities........................................... 11,375
Debt and capital lease obligations (note 6)................. 142,861
Shareholders' equity........................................ 74,675
-------
Total liabilities and shareholders' equity.................. 241,432
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-112
<PAGE> 367
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON SHARES TOTAL
(NOTE 8) COMMON SHARE ADDITIONAL ACCUMULATED SHAREHOLDERS'
NUMBER CAPITAL PAID-IN CAPITAL DEFICIT EQUITY
------------- ------------ --------------- ----------- -------------
L L L L
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1,
1995.......................... 200 -- 84,201 (37,344) 46,857
Shares issued and capital
contributions............... -- -- 60,000 -- 60,000
Net loss...................... -- -- -- (35,670) (35,670)
Interest imputed on
shareholders' subordinated
debt (note 6)............... -- -- -- 3,488 3,488
--- -- ------- ------- -------
BALANCE AT DECEMBER 31,
1996........................ 200 -- 144,201 (69,526) 74,675
=== == ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-113
<PAGE> 368
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS
SIXTEEN MONTHS YEAR ENDED ENDED
ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
-------------------- ----------------- -----------------
L L L
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss for the period................ (35,670) (30,449) (5,221)
Adjustments to reconcile net loss to
net cash provided by/(used in)
operating activities:
Depreciation and amortisation........ 18,199 14,660 3,539
Amortisation of deferred financing
costs............................. 5,146 4,946 200
Interest imputed on shareholders'
subordinated debt................. 3,488 3,404 84
Change in operating assets and
liabilities:
Change in trade receivables.......... (1,923) (381) (1,542)
Change in other assets............... 2,513 3,444 (931)
Change in accounts payable........... 2,291 3,585 (1,294)
Change in other liabilities.......... 5,600 4,971 629
-------- ------- -------
Net cash (used in)/provided by
operating activities................. (356) 4,180 (4,536)
-------- ------- -------
Cash flows from investing activities:
Cash invested in property and
equipment......................... (99,044) (74,119) (24,925)
Cash invested in set up & prematurity
costs............................. (7,513) (5,847) (1,666)
Proceeds from disposition of
assets............................ 16 16 --
-------- ------- -------
Net cash used in investing
activities........................... (106,541) (79,950) (26,591)
-------- ------- -------
Cash flows from financing activities:
Shareholder advances................. 112,113 81,403 30,710
Repayment of shareholder advances.... (60,000) (60,000) --
Repayment of capital lease
obligations....................... (961) (434) (527)
Issue of share capital............... 60,000 60,000 --
-------- ------- -------
Net cash provided by financing
activities........................... 111,152 80,969 30,183
-------- ------- -------
Net increase/(decrease) in cash and
cash equivalents..................... 4,255 5,199 (944)
Cash and cash equivalents at beginning
of period............................ 2,246 1,302 2,246
-------- ------- -------
Cash and cash equivalents at end of
period............................... 6,501 6,501 1,302
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-114
<PAGE> 369
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. TELECENTIAL
Telecential Communications (Canada) Limited and Telecential Communications
(UK) Limited (collectively "TELECENTIAL") have exclusive licenses to operate a
cable television and telecommunications business through their partnerships and
subsidiaries focused on certain franchise areas located south and east of
Birmingham and north and west of London, England.
At December 31, 1996, Telecential was indirectly 50% owned by each of
Koninklijke PTT Nederland N.V. and TELUS Corporation of Canada.
All amounts herein are presented in thousands in pounds sterling ("L").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Telecential combined financial statements have been prepared in
accordance with United States of America generally accepted accounting
principles.
Principles of Combination -- The financial statements combine the accounts
of Telecential and those of all majority owned subsidiaries for the 16 month
period ended December 31, 1996. The subsidiaries are under common ownership and
common management. All significant intercompany accounts and transactions have
been eliminated on combination.
Use of Estimates -- The preparation of financial statements in conformity
with United States of America generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cable System Costs and Expenses -- Telecential accounts for costs and
expenses applicable to the construction and operation of its cable system under
Statement of Financial Accounting Standards ("SFAS") No. 51, "Financial
Reporting by Cable Television Companies". Costs and expenses incurred in each
franchise during the set up period of the cable system have been capitalised in
full. Certain expenses incurred during the prematurity period are apportioned
between capital and revenue on the basis of the average number of subscribers as
a fraction of the number of subscribers estimated at the end of the prematurity
period. The prematurity period is deemed to run from when the first subscriber
is connected to the system to the earlier of three years or when the number of
cable television and telephony subscribers represents an appropriate penetration
percentage of the number of homes passed.
Franchise Costs -- Costs arising on the acquisition of franchises are
capitalised in accordance with SFAS 51 and are amortised on a straight line
basis over twenty years.
Revenue Recognition -- Revenue is recognised as services are delivered.
Initial connection fees are recognised in the period of connection.
Income Tax Expense -- Deferred tax assets and liabilities are recognised
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases to the extent that they are available to Telecential.
Under this method, deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to reverse. A valuation allowance is
raised against a deferred tax asset where it is more likely than not some
portion of the deferred tax asset will not be realised.
Investments -- Investments are stated at original cost less any appropriate
provisions for permanent diminution in value.
F-115
<PAGE> 370
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation on equipment other than cable infrastructure is computed on a
straight line basis using estimated useful lives of five to ten years. Cable
infrastructure is depreciated over twenty years. Leasehold improvements are
depreciated on a straight line basis over the lease periods.
Cash and Cash Equivalents -- Cash and cash equivalents include highly
liquid investments with original maturity of three months or less that are
readily convertible to cash.
Foreign Currencies -- The primary economic environment in which Telecential
operates is the United Kingdom and hence its reporting currency is the United
Kingdom pound sterling. Transactions in foreign currencies are recorded using
the rate of exchange in effect on the date of the transaction or at the forward
rate if the transaction has been hedged. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange in
effect on the balance sheet date and gains or losses on translation are included
in the statement of operations.
Leasing Commitments -- Assets held under finance leases are capitalised in
the balance sheet and are depreciated over their useful lives. The interest
element of the rental obligation is charged to expense over the period of the
lease and represents a constant proportion of the balance of capital repayments
outstanding.
Rentals paid under operating leases are charged to expense on a straight
line basis over the lease term.
Pension Plan -- Telecential operates a defined contribution pension plan
for eligible employees and contributes up to specified limits to a third party
plan of the employee's choice. Pension costs which totalled L437,000 in the
sixteen month period ended December 31, 1996 represent the contributions payable
to the selected plans.
Concentration of Credit Risk and Market Risk -- Telecential operates
predominantly in one industry segment, the provision of cable television and
telecommunications services in certain areas of England. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising Telecential's customer base. Ongoing credit
evaluations of customers' financial condition are performed and generally, no
collateral is required. Telecential maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded management's
estimates. No single customer accounts for 10% or more of combined revenues.
Fair Value of Financial Instruments -- Financial instruments are defined as
cash or contracts relating to the receipt, delivery or exchange of financial
instruments. Except as otherwise noted, fair value approximates the carrying
value of such instruments.
3. INCOME TAX EXPENSE
No provision for deferred taxation has been made due to operating losses
incurred to date. Various subsidiary entities of Telecential have net tax
operating losses carried forward of approximately L38 million at December 31,
1996.
The operating losses have an unlimited carry forward period under United
Kingdom tax law (subject to restrictions on a loss carried forward where there
is a change in group ownership and a major change in the nature or conduct of
the business), but are limited in their use to the type of business which
generated the loss and to those entities in which the losses arose.
F-116
<PAGE> 371
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Differences between the tax benefit recognised in the financial statements
and the expected tax benefit at the United Kingdom statutory rate of 33% are
summarised as follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED
SIX MONTHS ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
-------------------- ----------------- -----------------
L L L
(IN THOUSANDS)
<S> <C> <C> <C>
Tax benefit on loss before
income tax expense at
statutory rate............... (10,706) (9,010) (1,696)
Non-deductible expenses........ 28 21 7
Tax benefit of operating losses
not recognised currently..... 10,807 9,086 1,721
------- ------ ------
Income tax expense............. 129 97 32
======= ====== ======
Deferred tax assets relating
to:
Net losses..................... 12,509 12,509 7,917
Valuation allowance............ (8,046) (8,046) (47)
------- ------ ------
4,463 4,463 7,870
Deferred tax liabilities
relating to:
Property, plant and
equipment.................... (4,463) (4,463) (7,870)
------- ------ ------
Deferred tax per balance
sheet........................ -- -- --
======= ====== ======
</TABLE>
The ultimate realisation of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, the level of
historical taxable losses, and tax planning strategies in making its assessment
as to the appropriateness of the reported valuation allowance.
The income tax expense for the period represents current taxation on those
United Kingdom profits against which United Kingdom tax relief cannot be offset.
F-117
<PAGE> 372
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
L
(IN THOUSANDS)
<S> <C>
Land and buildings and improvements......................... 3,922
Plant and equipment......................................... 234,593
Set-up and prematurity costs................................ 19,768
-------
258,283
Less accumulated depreciation............................... (36,126)
-------
222,157
=======
</TABLE>
Telecential leases certain plant and equipment under arrangements accounted
for as capital leases. The original cost of assets held under these arrangements
was L13,847 at December 31, 1996. Accumulated depreciation charged against these
assets was L3,693 at December 31, 1996.
Depreciation expense totalled L18,199 in the sixteen month period ended
December 31, 1996 of which L1,264 represented depreciation on assets held under
capital lease arrangements.
5. INVESTMENTS
Investments are stated at cost and comprise:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
L
(IN THOUSANDS)
<S> <C>
ComTel Coventry Limited............................. 869
Other............................................... 100
---
969
===
</TABLE>
ComTel Coventry Limited is registered in England and Wales and holds the
cable television license for the Coventry franchise. The amount for ComTel
Coventry Limited represented a 12.25% shareholding in the company. The remaining
shares were held by a related company, Vision Networks UK Holding B.V., at
December 31, 1996 and to whom the above equity interest was transferred, at
cost, during 1997.
The fair value of the above investments is not less than original cost.
6. DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
L
(IN THOUSANDS)
<S> <C>
Bank loan........................................... 30,000
Shareholders' subordinated debt..................... 95,223
Capital lease obligations........................... 17,638
-------
142,861
=======
</TABLE>
F-118
<PAGE> 373
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Bank Loan
In December 1994, Telecential entered into a L140 million facility with a
syndicate of banks. Following initial drawdowns which totalled L30 million,
Telecential was unable to make any further drawdowns on the loan and the balance
of the facility was cancelled. The bank facility was therefore fully drawn at
December 31, 1996. Interest was at LIBOR plus 3%. At December 31, 1996, the rate
was 9.047%. Interest and commitment fees expense amounted to L4,313 during the
sixteen month period ended December 31, 1996. The loan was repaid in August 1997
and the remaining facility cancelled.
Shareholders' Subordinated Debt
The changes in shareholders' subordinated debt in the period were as
follows:
<TABLE>
<CAPTION>
1996
--------------
L
(IN THOUSANDS)
<S> <C>
As at September 1, 1995..................................... 43,110
Subordinated debt borrowings................................ 112,113
Subordinated debt converted to equity....................... (60,000)
-------
As at December 31, 1996..................................... 95,223
=======
</TABLE>
The shareholders' subordinated debt is interest free and has no specific
repayment terms. An imputed interest expense of L3,488,000 has been recognised
and accounted for as a capital contribution. The interest expense has been
calculated by applying a variable rate comprising the aggregate of a margin and
LIBOR applicable to the related loan made to the company's parent by ING Bank
NV. As at December 31, 1996, the margin was 15 basis points and the one month
LIBOR rate was 6.047%.
Capital Lease Obligations
Future minimum lease payments under non cancellable capital leases are
summarised as follows as of December 31, 1996:
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................ 1,588
1998........................................................ 2,283
1999........................................................ 1,242
2000........................................................ 1,961
2001........................................................ 1,547
Thereafter.................................................. 9,017
------
17,638
Imputed interest............................................ 602
------
18,240
======
</TABLE>
Cash paid for interest on capital leases totalled L1,059 for the sixteen
month period ended December 31, 1996.
F-119
<PAGE> 374
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
Telecential leases business offices and uses certain equipment under lease
agreements accounted for as operating leases. Minimum rental expenses under such
arrangements amounted to L2,533 for the sixteen month period ended December 31,
1996.
Future minimum lease payments under non cancellable operating leases are
summarised as follows as of December 31, 1996:
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
1997.................................................... 1,806
1998.................................................... 3,017
1999.................................................... 1,646
2000.................................................... 1,643
2001.................................................... 4,586
Thereafter.............................................. 28,113
------
40,811
======
</TABLE>
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced by leases on other properties.
Milestones
Telecential is obligated under the terms of its existing licenses, and
under the milestone requirements of Local Delivery Licenses ("LDL's") to
construct cable systems passing a predefined number of premises. Should
Telecential fail to achieve these milestones, without license modifications, the
Director General could commence proceedings to require compliance. Similarly the
Independent Television Commission ("ITC") may commence proceedings to require
compliance with the build milestones in the LDL's.
If Telecential is unable to comply, its license in respect of which
milestones have not been met could be revoked and awarded to other cable
operators, which could have a material adverse effect on Telecential.
As of December 31, 1996 Telecential was in compliance with its milestone
obligations.
F-120
<PAGE> 375
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMON SHARE CAPITAL
Common Share Capital comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
L
(IN THOUSANDS)
<S> <C>
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED:
Authorised:
Unlimited number of Common Shares with no par value
Called up, allotted and fully paid:
200 Common Shares of no par value each...................... --
------
--
======
TELECENTIAL COMMUNICATIONS (UK) LIMITED:
Authorised:
Unlimited number of Common Shares with L0.05 par value
Called up, allotted and fully paid:
200 Common Shares of L0.05 par value each (L10)............. --
------
--
======
</TABLE>
9. SUBSEQUENT EVENTS
On June 16, 1998, NTL Group Limited, a subsidiary of NTL Incorporated,
entered into an undertaking to acquire the entire issued share capital of ComTel
Limited, Heartland Cablevision (UK) Limited and Heartland Cablevision II (UK)
Limited, together with all interests in the Telecommunications Partnership and
LP5 and LP6 (the "Telecential Assets"). The Telecential Assets form
substantially all of Telecential's combined group as presented in these
financial statements. The completion of the acquisition of the Telecential
Assets is subject to compliance with certain obligations on all parties to the
sale before March 15, 1999 or, subject to specific exceptions, December 31,
2002.
F-121
<PAGE> 376
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
NTL Communications Corp.
110 East 59th Street
New York, New York 10022
USA
TRUSTEE, PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
USA
LUXEMBOURG PAYING AND TRANSFER AGENT
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis
L-2338, Luxembourg
LISTING AGENT
Banque Internationale a Luxembourg
69, route d'Esch
1-1470 Luxembourg
LEGAL ADVISORS TO THE COMPANY
Skadden, Arps, Slate, Meagher & Flom LLP
One Canada Square
Canary Wharf
London E14 5DS
England
AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
USA
<PAGE> 377
- ------------------------------------------------------
- ------------------------------------------------------
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized any other person to provide you
with different information. This prospectus may be delivered to you after the
date of this prospectus. However, you should realize that the affairs of NTL may
have changed since the date of this prospectus. This prospectus will not reflect
such changes. You should not consider this prospectus to be an offer or
solicitation relating to the notes in any jurisdiction in which such an offer or
solicitation is not authorized.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Explanatory Note Regarding Corporate
Restructuring of NTL.................. i
Prospectus Summary.................... 1
Risk Factors.......................... 11
The Exchange Offer.................... 20
Use of Proceeds....................... 30
Exchange Rates........................ 30
Capitalization........................ 31
Selected Historical and Pro Forma
Consolidated Financial
Information......................... 33
Unaudited Pro Forma Financial Data.... 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 41
Description of the 2006 Notes......... 118
Description of the 2009 Notes......... 145
Description of the Deferred Coupon
Notes............................... 172
Registration Rights................... 220
Description of Other Indebtedness..... 222
Federal Income Tax Considerations..... 236
Plan of Distribution.................. 244
Legal Matters......................... 245
Experts............................... 245
Enforceability of Civil Liabilities... 245
Where You Can Find More Information... 247
General Information................... 249
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Until , 2000, which is 90 days after the date of this
prospectus, if you are a dealer effecting transactions in the new notes, whether
or not you are participating in the exchange offer, you may be required to
deliver a prospectus. This obligation is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
[NTL LOGO]
NTL COMMUNICATIONS CORP.
E250,000,000
9 1/4% SERIES B SENIOR
NOTES DUE 2006
E350,000,000
9 7/8% SERIES B SENIOR
NOTES DUE 2009
E210,000,000
11 1/2% SERIES B SENIOR
DEFERRED COUPON NOTES
DUE 2009
------------------------
PROSPECTUS
------------------------
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 378
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Restated Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Company and its
stockholders arising from a breach or alleged breach of a director's fiduciary
duty except for liability under Section 174 of the DGCL or liability for a
breach of the director's duty of loyalty to the Company or its stockholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law or for any transaction in which the director derived an
improper personal benefit. The effect of this provision in the certificate of
incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders, derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of fiduciary duty as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described above.
The Company's Restated By-laws provide that directors and officers of the
Company shall be indemnified against liabilities arising from their service as
directors and officers to the full extent permitted by law. Section 145 of the
DGCL empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the fight of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in which
such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to
II-1
<PAGE> 379
above or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation is empowered to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The Company has entered into a director and officer indemnity agreement
("Indemnity Agreement") with each officer and director of the Company (an
"Indemnitee"). Under the bylaws and these Indemnity Agreements, the Company must
indemnify an Indemnitee to the fullest extent permitted by the DGCL for losses
and expenses incurred in connection with actions in which the indemnitee is
involved by reason of having been a director or officer of the Company. The
Company is also obligated to advance expenses an indemnitee may incur in
connection with such actions before any resolution of the action.
ITEM 21. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of March 26, 1999
among NTL Incorporated, NTL Communications, Corp. and NTL
Mergerco, Inc.
3.2(a) Agreement and Plan of Merger, dated as of March 26, 1999
among NTL Incorporated, NTL Communications Corp. and NTL
Mergerco, Inc. (included as Exhibit 2.1)
4.1 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the 2006 notes*
4.2 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the 2009 notes*
4.3 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the deferred coupon notes*
4.4 Registration Rights Agreement, dated as of November 24,
1999, by and among the Company and Morgan Stanley & Co.
International Limited, Goldman Sachs International, Chase
Securities Inc., Donaldson, Lufkin & Jenrette International
and Salomon Brothers, with respect to the notes*
4.5 Form of new 2006 notes (included in Exhibit 4.1)
4.6 Form of new 2009 notes (included in Exhibit 4.2)
4.7 Form of new deferred coupon notes (included in Exhibit 4.3)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the notes being registered hereby**
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends**
</TABLE>
II-2
<PAGE> 380
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23.1 Consent of Ernst & Young, LLP*
23.2 Consent of Deloitte & Touche LLP*
23.3 Consent of Deloitte & Touche -- Birmingham*
23.4 Consent of Deloitte & Touche -- London*
23.5 Consent of Deloitte & Touche -- Comtel*
23.6 Consent of Coopers & Lybrand -- ComTel*
23.8 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)**
24.1 Powers of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included as Exhibit 4.1*
25.2 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included on Exhibit 4.2*
25.3 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included Exhibit 4.3*
99.1 Form of Letter of Transmittal in respect of the Notes*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Letter to Brokers, Dealers, Trust Companies and
others Nominees*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Company's and NTL Incorporated's
Registration Statement on Form S-3, File No. 333-72335.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the
II-3
<PAGE> 381
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 382
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of New York,
State of New York, on the 24th day of January, 2000.
NTL Communications Corp.
By /s/ RICHARD J. LUBASCH
------------------------------------
Richard J. Lubasch
Executive Vice President --
General Counsel and Secretary
POWER OF ATTORNEY
KNOWN BY ALL PERSONS BY THESE PRESENTS, that each person whose signatures
appears below, constitutes and appoints Richard J. Lubasch, John F. Gregg and
Gregg Gorelick, or any of them, acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person and in his name, place and stead, in any and all capacities, in
connection with the registrant's Registration Statement in the name and on
behalf of the registrant or on behalf of the undersigned as a director or
officer of the registrant, on Form S-4 under the Securities Act of 1933, as
amended, including, without limiting the generality of the foregoing, to sign
the Registration Statement and any and all amendments (including post-effective
amendments) to the Registration Statement, and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent or either of them, acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done and perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, thereby ratifying and confirming all that said
attorney-in-fact and agent or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
II-5
<PAGE> 383
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GEORGE S. BLUMENTHAL Chairman of the Board, Treasurer January 24, 2000
- --------------------------------- and Director
George S. Blumenthal
/s/ J. BARCLAY KNAPP President, Chief Executive January 24, 2000
- --------------------------------- Officer and Director
J. Barclay Knapp
/s/ JOHN F. GREGG Senior Vice President, Chief January 24, 2000
- --------------------------------- Financial Officer
John F. Gregg
/s/ GREGG GORELICK Vice President -- Controller January 24, 2000
- ---------------------------------
Gregg Gorelick
/s/ SIDNEY R. KNAFEL Director January 24, 2000
- ---------------------------------
Sidney R. Knafel
/s/ TED H. MCCOURTNEY Director January 24, 2000
- ---------------------------------
Ted H. McCourtney
/s/ DEL MINTZ Director January 24, 2000
- ---------------------------------
Del Mintz
Director January 24, 2000
- ---------------------------------
Alan J. Patricof
/s/ WARREN POTASH Director January 24, 2000
- ---------------------------------
Warren Potash
Director January 24, 2000
- ---------------------------------
Michael S. Willner
</TABLE>
II-6
<PAGE> 384
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of March 26, 1999
among NTL Incorporated, NTL Communications Corp. and NTL
Mergerco, Inc.(1)
3.2(a) Agreement and Plan of Merger, dated as of March 26, 1999
among NTL Incorporated, NTL Communications Corp. and NTL
Mergerco, Inc. (Included as Exhibit 2.1)
4.1 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the 2006 notes*
4.2 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the 2009 notes*
4.3 Indenture, dated as of November 24, 1999, by and between the
Company and The Chase Manhattan Bank, as Trustee, with
respect to the deferred coupon notes*
4.4 Registration Rights Agreement, dated as of November 24,
1999, by and among the Company and Morgan Stanley & Co.
International Limited, Goldman Sachs International, Chase
Securities Inc., Donaldson, Lufkin & Jenrette International
and Salomon Brothers, with respect to the notes*
4.5 Form of new 2006 notes (included in Exhibit 4.1)
4.6 Form of new 2009 notes (included in Exhibit 4.2)
4.7 Form of new deferred coupon notes (included in Exhibit 4.3)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the notes being registered hereby**
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends**
23.1 Consent of Ernst & Young, LLP*
23.2 Consent of Deloitte & Touche LLP*
23.3 Consent of Deloitte & Touche -- Birmingham*
23.4 Consent of Deloitte & Touche -- London*
23.5 Consent of Deloitte & Touche -- Comtel*
23.6 Consent of Coopers & Lybrand -- ComTel*
23.8 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)**
24.1 Powers of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included as Exhibit 4.1*
25.2 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included on Exhibit 4.2*
25.3 Form T-1 Statement of Eligibility of Trustee with respect to
Indenture included Exhibit 4.3*
99.1 Form of Letter of Transmittal in respect of the Notes*
</TABLE>
<PAGE> 385
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Letter to Clients*
99.4 Form of Letter to Brokers, Dealers, Trust Companies and
others Nominees*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from the Company's and NTL Incorporated's
Registration Statement on Form S-3, File No. 333-72335.
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
NTL COMMUNICATIONS CORP.
EURO250,000,000
9 1/4% SENIOR NOTES DUE 2006
-----------------------------
INDENTURE
Dated as of November 24, 1999
-----------------------------
------------------------
The Chase Manhattan Bank
Trustee
------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................1
SECTION 1.01 Definitions......................................................................1
SECTION 1.02 Other Definitions...............................................................13
SECTION 1.03 Incorporation by Reference of Trust Indenture Act...............................14
SECTION 1.04 Rules of Construction...........................................................14
ARTICLE II. THE NOTES............................................................................15
SECTION 2.01 Form and Dating.................................................................15
SECTION 2.02 Execution and Authentication....................................................17
SECTION 2.03 Registrar and Paying Agent......................................................17
SECTION 2.04 Paying Agent to Hold Money in Trust.............................................18
SECTION 2.05 Holder Lists....................................................................18
SECTION 2.06 Transfer and Exchange...........................................................18
SECTION 2.07 Replacement Notes...............................................................23
SECTION 2.08 Outstanding Notes...............................................................23
SECTION 2.09 Treasury Notes..................................................................23
SECTION 2.10 Temporary Notes; Global Notes...................................................23
SECTION 2.11 Cancellation....................................................................24
SECTION 2.12 Defaulted Interest..............................................................24
ARTICLE III. REDEMPTION..........................................................................24
SECTION 3.01 Notices to Trustee..............................................................24
SECTION 3.02 Intentionally Omitted...........................................................25
SECTION 3.03 Notice of Redemption............................................................25
SECTION 3.04 Effect of Notice of Redemption..................................................25
SECTION 3.05 Deposit of Redemption Price.....................................................25
SECTION 3.06 Intentionally Omitted...........................................................25
SECTION 3.07 Optional Tax Redemption.........................................................25
SECTION 3.08 Mandatory Redemption............................................................26
SECTION 3.09 Asset Sale Offer and Purchase Offer.............................................26
ARTICLE IV. COVENANTS............................................................................28
SECTION 4.01 Payment of Notes................................................................28
SECTION 4.02 Reports.........................................................................28
SECTION 4.03 Compliance Certificate..........................................................29
SECTION 4.04 Stay, Extension and Usury Laws..................................................29
SECTION 4.05 Corporate Existence.............................................................29
SECTION 4.06 Taxes...........................................................................30
SECTION 4.07 Limitations on Liens............................................................30
SECTION 4.08 Incurrence Of Indebtedness And Issuance Of Preferred Stock......................30
SECTION 4.09 Restricted Payments.............................................................32
SECTION 4.10 Asset Sales.....................................................................35
SECTION 4.11 Transactions with Affiliates....................................................37
SECTION 4.12 Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries......38
SECTION 4.13 Change of Control...............................................................39
SECTION 4.14 Payment of Additional Amounts...................................................39
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V. SUCCESSORS............................................................................40
SECTION 5.01 Merger, Consolidation or Sale of Assets.........................................40
SECTION 5.02 Successor Corporation Substituted...............................................41
ARTICLE VI. DEFAULTS AND REMEDIES................................................................41
SECTION 6.01 Events of Default...............................................................41
SECTION 6.02 Acceleration....................................................................42
SECTION 6.03 Other Remedies..................................................................43
SECTION 6.04 Waiver of Past Defaults.........................................................43
SECTION 6.05 Control by majority.............................................................43
SECTION 6.06 Limitation on Suits.............................................................43
SECTION 6.07 Rights of Holders to Receive Payment............................................44
SECTION 6.08 Collection Suit by Trustee......................................................44
SECTION 6.09 Trustee May File Proofs of Claim................................................44
SECTION 6.10 Priorities......................................................................44
SECTION 6.11 Undertaking for Costs...........................................................44
ARTICLE VII. TRUSTEE.............................................................................45
SECTION 7.01 Duties of Trustee...............................................................45
SECTION 7.02 Rights of Trustee...............................................................45
SECTION 7.03 Individual Rights of Trustee....................................................46
SECTION 7.04 Trustee's Disclaimer............................................................46
SECTION 7.05 Notice of Defaults..............................................................46
SECTION 7.06 Reports by Trustee to Holders...................................................46
SECTION 7.07 Compensation and Indemnity......................................................46
SECTION 7.08 Replacement of Trustee..........................................................47
SECTION 7.09 Successor Trustee by Merger, Etc................................................48
SECTION 7.10 Eligibility; Disqualification...................................................48
SECTION 7.11 Preferential Collection of Claims Against Company...............................48
ARTICLE VIII. DISCHARGE OF INDENTURE.............................................................49
SECTION 8.01 Termination of Company's Obligations............................................49
SECTION 8.02 Option to Effect Defeasance.....................................................49
SECTION 8.03 Application of Trust Money......................................................50
SECTION 8.04 Repayment to Company............................................................50
SECTION 8.05 Reinstatement...................................................................51
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................51
SECTION 9.01 Without Consent of Holders......................................................51
SECTION 9.02 With Consent of Holders.........................................................51
SECTION 9.03 Compliance with Trust Indenture Act.............................................52
SECTION 9.04 Revocation and Effect of Consents...............................................52
SECTION 9.05 Notation on or Exchange of Notes................................................53
SECTION 9.06 Trustee Protected...............................................................53
ARTICLE X. MISCELLANEOUS.........................................................................53
SECTION 10.01 Trust Indenture Act Controls....................................................53
SECTION 10.02 Notices.........................................................................53
SECTION 10.03 Communication by Holders with Other Holders.....................................54
SECTION 10.04 Certificate and Opinion as to Conditions Precedent..............................54
SECTION 10.05 Statements Required in Certificate or Opinion...................................54
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 10.06 Rules by Trustee and Agents.....................................................54
SECTION 10.07 Legal Holidays..................................................................54
SECTION 10.08 No Recourse Against Others......................................................54
SECTION 10.09 Counterparts and Facsimile Signatures...........................................55
SECTION 10.10 Variable Provisions.............................................................55
SECTION 10.11 Governing Law...................................................................55
SECTION 10.12 Rights of the Registrar and Paying Agent........................................55
SECTION 10.13 No Adverse Interpretation of Other Agreements...................................56
SECTION 10.14 Successors......................................................................56
SECTION 10.15 Severability....................................................................56
SECTION 10.16 Table of Contents, Headings, Etc................................................56
</TABLE>
iii
<PAGE> 5
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
310 (a)(1)..................................................7.10
(a)(2) .....................................................7.10
(a)(3)......................................................N.A.
(a)(4)......................................................N.A.
(a)(5)......................................................7.10
(b) .......................................................7.08
7.10
(c) .......................................................N.A.
311(a)......................................................7.11
(b) .......................................................7.11
(c) .......................................................N.A.
312 (a).....................................................2.05
(b) .......................................................10.03
(c) .......................................................10.03
313(a)......................................................7.06
(b)(1)......................................................N.A.
(b)(2)......................................................7.06
(c) .......................................................7.06
(d) .......................................................7.06
314(a)......................................................4.02
4.03
(b) .......................................................N.A.
(c)(1)......................................................10.04
(c)(2)......................................................10.04
(c)(3)......................................................N.A.
(d) .......................................................N.A.
(e) .......................................................N.A.
(f) .......................................................N.A.
315 (a).....................................................7.01(b)
(b) .......................................................7.05
(c) .......................................................7.01(a)
(d) .......................................................7.01(c)
(e) .......................................................6.11
316 (a)(last sentence)......................................2.09
(a)(1)(A)...................................................6.05
(a)(1)(B)...................................................6.04
(a)(2)......................................................N.A.
(b) .......................................................6.07
(c) .......................................................9.04
317 (a)(1)..................................................6.08
(a)(2)......................................................6.09
(b) .......................................................2.04
318 (a).....................................................N.A.
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
iv
<PAGE> 6
INDENTURE, dated as of November 24, 1999, between NTL Communications Corp.,
a Delaware corporation (the "COMPANY"), and The Chase Manhattan Bank, a New York
corporation, as trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders (as defined in Section 1.01) of the
Company's 9 1/4% Senior Notes due 2006 (the "INITIAL NOTES") and, if and when
issued in exchange for Initial Notes, the Company's 9 1/4% Series B Senior Notes
due 2006 (the "EXCHANGE NOTES" and, together with the Initial Notes, the
"NOTES"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"1999 9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon Notes
due 2009 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due
2009.
"2009 DISCOUNT NOTES" means the Company's 11 1/2% Senior Deferred Coupon
Notes due 2009 and the Company's 11 1/2% Series B Senior Deferred Coupon Notes
due 2009.
"2009 NOTES" means the Company's 90% Senior Notes due 2009 and the
Company's 90% Series B Senior Notes due 2009.
"9 1/2% NOTES" means the Company's 9 1/2% Senior Notes due 2008 and the
Company's 9 1/2% Series B Senior Notes due 2008.
"9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon Notes due
2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due 2008.
"10% NOTES" means the Company's 10% Series B Senior Notes due 2007.
"10 3/4% NOTES" means the Company's 10 3/4% Senior Deferred Coupon Notes
due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes due
2008.
"11 1/2% DEFERRED COUPON NOTES" means the Company's 11 1/2% Series B Senior
Deferred Coupon Notes due 2006.
"11 1/2% NOTES" means the Company's 11 1/2% Senior Notes due 2008 and the
Company's 11 1/2% Series B Senior Notes due 2008.
"12 3/4% NOTES" means the Company's 12 3/4% Series A Senior Deferred Coupon
Notes due 2005.
"12M % NOTES" means the Company's 123/8% Series B Senior Deferred Coupon
Notes due 2008.
"ACQUIRED DEBT" means, with respect to any specified Person, Indebtedness
of any other Person (the "Acquired Person") existing at the time such Acquired
Person merged with or into or became a Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, such
Acquired Person merging with or into or becoming a Subsidiary of such specified
Person.
"ACQUIRED PERSON" has the meaning specified in the definition of Acquired
Debt.
1
<PAGE> 7
"ADDITIONAL NOTES" means up to euro150,000,000 in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
"ADJUSTED TOTAL ASSETS" means the total amount of assets of the Company and
its Restricted Subsidiaries (including the amount of any Investment in any
Non-Restricted Subsidiary), except to the extent resulting from write-ups of
assets (other than write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities of
the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as calculated in conformity with GAAP. For purposes of this
Adjusted Total Assets definition, (a) assets shall be calculated less applicable
accumulated depreciation, accumulated amortization and other valuation reserves,
and (b) all calculations shall exclude all intercompany items.
"ADJUSTED TOTAL CONTROLLED ASSETS" means the total amount of assets of the
Company and its Cable Controlled Subsidiaries, except to the extent resulting
from write-ups of assets (other than write-ups in connection with accounting for
acquisitions in conformity with GAAP), after deducting therefrom (i) all current
liabilities of the Company and such Cable Controlled Subsidiaries; and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles of the Company and such Restricted
Subsidiaries, all as calculated in conformity with GAAP; provided that Adjusted
Total Controlled Assets shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to the aggregate amount of all
Investments of the Company or any such Cable Controlled Subsidiaries in any
Person other than a Cable Controlled Subsidiary, except Cash Equivalents. For
purposes of this Adjusted Total Controlled Assets definition, (a) assets shall
be calculated less applicable accumulated depreciation, accumulated amortization
and other valuation reserves, and (b) all calculations shall exclude all
intercompany items.
"AFFILIATE" of any specified Person means any other Person directly
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Registrar or Paying Agent.
"ANNUALIZED PRO FORMA EBITDA" means, with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"ASSET SALE" means (i) any sale, lease, transfer, conveyance or other
disposition of any assets (including by way of a sale-and-leaseback) other than
the sale or transfer of inventory or goods held for sale in the ordinary course
of business (provided that the sale, lease, transfer, conveyance or other
disposition of all or substantially all of the assets of the Company shall be
governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease,
transfer, conveyance or other disposition of any Equity Interests of any of the
Company's Restricted Subsidiaries to any Person; in either case other than (A)
to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which
is a Subsidiary of the Company on the Issuance Date provided that at the time of
and after giving effect to such issuance, sale, lease, transfer, conveyance or
other disposition to such Subsidiary, the Company's ownership percentage in such
Subsidiary is equal to or greater than such percentage on the Issuance Date or
(B) the issuance,
2
<PAGE> 8
sale, transfer, conveyance or other disposition of Equity Interests of a
Subsidiary in exchange for capital contributions made on a pro rata basis by the
holders of the Equity Interests of such Subsidiary.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CABLE ASSETS" means tangible or intangible assets, licenses (including,
without limitation, Licenses) and computer software used in connection with a
Cable Business.
"CABLE BUSINESS" means (i) any Person directly or indirectly operating, or
owning a license to operate, a cable and/or television and/or telephone and/or
telecommunications system or service principally within the United Kingdom
and/or the Republic of Ireland and (ii) any Cable Related Business.
"CABLE CONTROLLED PROPERTY" means a Cable Controlled Subsidiary or a Cable
Asset held by a Cable Controlled Subsidiary.
"CABLE CONTROLLED SUBSIDIARY" means any Restricted Subsidiary that is
primarily engaged, directly or indirectly, in one or more Cable Businesses.
"CABLE RELATED BUSINESS" means a Person which directly or indirectly owns
or provides a service or product used in a Cable Business, including, without
limitation, any television programming, production and/or licensing business or
any programming guide or telephone directory business or content or software
related thereto.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, partnership interests.
"CAPITAL STOCK SALE PROCEEDS" means the aggregate net sale proceeds
(including from the sale of any property received for the Capital Stock or the
fair market value of such property, as determined by an independent appraisal
firm) received by the Company or any Subsidiary of the Company from the issue or
sale (other than to a Subsidiary) by the Company of any class of its Capital
Stock after October 14, 1993 (including Capital Stock of the Company issued
after October 14, 1993 upon conversion of or in exchange for other securities of
the Company).
"CASH EQUIVALENTS" means (i) Permitted Currency, (ii) securities issued or
directly and fully guaranteed or insured by the United States government, a
European Union member government or any agency or instrumentality thereof having
maturities of not more than six months and two days from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States, the United Kingdom, the Republic of Ireland or any other European Union
member having capital and surplus in excess of $500.0 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the
equivalent thereof by S & P and in each case maturing within six months and two
days after the date of acquisition and (vi) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds described in
clauses (i)-(v) of this definition.
3
<PAGE> 9
"CEDEL" means Cedelbank, S.A.
"CHANGE OF CONTROL" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder),
(ii) the approval by the requisite stockholders of the Company of a plan of
liquidation or dissolution of the Company, (iii) any "Person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting for the purpose
of acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of all classes of the voting stock of the
Company and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis, unless, as a result of such transaction, the ultimate
direct or indirect ownership of the Company is substantially the same
immediately after such transaction as it was immediately prior to such
transaction, or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a Change
of Control and a Ratings Decline.
"COMPANY" means the party named as such above until a successor replaces it
in accordance with Article V and thereafter means the successor.
"CONSOLIDATED INTEREST EXPENSE" means, for any Person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled to
be paid or accrued by such Person and its Subsidiaries (other than
Non-Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in such
capital lease obligation in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
(other than Non-Restricted Subsidiaries) for such period, on a consolidated
basis, determined in accordance with GAAP; provided that (i) the Net Income of
any Person that is not a Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent Person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends or
distributions
4
<PAGE> 10
paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded and (iv) the cumulative
effect of a change in accounting principles shall be excluded.
"CONVERTIBLE SUBORDINATED NOTES" means the Company's 7% Convertible
Subordinated Notes due 2008 issued pursuant to an indenture dated as of
December 16, 1998 between the Company and The Chase Manhattan Bank, as trustee.
"CREDIT FACILITY" means the Facilities Agreement, dated October 17, 1997,
between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as
arranger, Chase Manhattan International Limited, as agent and security trustee
and The Chase Manhattan Bank as issuer, as such Facilities Agreement may be
supplemented, amended, restated, modified, renewed, refunded, replaced or
refinanced, in whole or in part, from time to time in an aggregate outstanding
principal amount not to exceed the greater of (i) (pound)555.0 million and (ii)
the amount of the aggregate commitments thereunder as the same may be increased
after March 13, 1998 as contemplated by the Facilities Agreement as amended or
supplemented to March 13, 1998, but in no event greater than (pound)875.0
million, less in each case, the aggregate amount of all Net Proceeds of Asset
Sales that have been applied to permanently reduce Indebtedness under the Credit
Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be
incurred under this Indenture may, but need not, be incurred under the Credit
Facility without regard to the limit set forth in the preceding sentence.
Indebtedness outstanding under the Credit Facility on the date hereof shall be
deemed to have been incurred on such date in reliance on the exception provided
by Section 4.08(b)(i).
"CUMULATIVE EBITDA" means the cumulative EBITDA of the Company from and
after the Issuance Date to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries
shall not be included.
"CUMULATIVE INTEREST EXPENSE" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by the Company
from the Issuance Date to the end of the fiscal quarter immediately preceding a
proposed Restricted Payment, determined on a consolidated basis in accordance
with GAAP.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" shall mean DTC (in the case of the DTC Rule 144A Global Notes)
Euroclear (in the case of Regulation S Global Notes or Euroclear Rule 144A
Global Notes) or Cedel (in the case of Regulation S Global Notes), as
applicable.
"DIAMOND NOTES" shall mean the 10% Diamond Senior Notes due 2008, the 91/8%
Diamond Senior Notes due 2008, the 10 3/4% Diamond Senior Discount Notes due
2007, the 11 3/4% Diamond Senior Discount Notes due 2005 and the 13 1/4% Diamond
Senior Discount Notes due 2004.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"DTC" means The Depository Trust Company.
5
<PAGE> 11
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash item reducing
Consolidated Net Income for such period (excluding any such non-cash item to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period), minus (B) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined in accordance
with GAAP consistently applied.
"EEA GOVERNMENT OBLIGATION" means direct non-callable obligations of, or
non-callable obligations guaranteed by, any European Union member for the
payment of which obligation or guarantee the full faith and credit of the
respective nation is pledged; provided that such nation has a credit rating at
least equal to that of the highest rated member nation of the European Economic
Area.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office as operator of the Euroclear system.
"EUROPEAN ECONOMIC AREA" means the member nations of the European Economic
Area pursuant to the Oporto Agreement on the European Economic Area, dated
May 2, 1992, as amended.
"EUROPEAN UNION MEMBER" means any country that is or becomes a member of
the European Union or any successor organization thereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange rates.
An Exchange Rate Contract may also include an Interest Rate Agreement.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the Issuance Date, until such amounts are repaid,
including, without limitation, the Existing Notes.
"EXISTING NOTES" means the Old Notes and the Convertible Subordinated
Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date and are applied on a consistent basis.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without
6
<PAGE> 12
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the register
referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant to
capital leases and sale-and-leaseback transactions) or representing any hedging
obligations under an Exchange Rate Contract or an Interest Rate Agreement,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than obligations
under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, the Guarantee of items
which would be included within this definition. The amount of any Indebtedness
outstanding as of any date shall be the accreted value thereof, in the case of
any Indebtedness issued with original issue discount.
"INDENTURE" means this Indenture, as amended from time to time.
"INITIAL PURCHASERS" means Morgan Stanley & Co. International Limited,
Goldman Sachs International, Chase Securities Inc., Donaldson, Lufkin & Jenrette
International, and Salomon Brothers International Limited.
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
similar agreement, the principal purpose of which is to protect the party
indicated therein against fluctuations in interest rates.
"INVESTMENT GRADE" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's. In the event that the
Company shall be permitted to select any other Rating Agency, the equivalent of
such ratings by such Rating Agency shall be used.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances and loans, joint property ownership and other arrangements, in
each case, made to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"ISSUANCE DATE" means the date on which the Notes are first authenticated
and issued.
"LICENSE" means any license issued or awarded pursuant to the Broadcasting
Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984
or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time
to time, be amended, modified or re-enacted) (or equivalent statutes of any
jurisdiction) to operate or own a Cable Business.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the
7
<PAGE> 13
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent or successor statutes) of any
jurisdiction).
"MATERIAL LICENSE" means a License held by the Company or any of its
Subsidiaries which License at the time of determination covers a number of Net
Households which equals or exceeds 5% of the aggregate number of Net Households
covered by all of the Licenses held by the Company and its Subsidiaries at such
time.
"MATERIAL SUBSIDIARY" means (i) NTL UK Group, Inc. (formerly known as OCOM
Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel
Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and
CableTel Kirklees and (ii) any other Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).
"MONETIZE" means a strategy with respect to Equity Interests that generates
an amount of cash equal to the fair value of such Equity Interests.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET HOUSEHOLDS" means the product of (i) the number of households covered
by a License in the United Kingdom and (ii) the percentage of the entity holding
such License which is owned directly or indirectly by the Company.
"NET INCOME" means, with respect to any Person for a specific period, the
net income (loss) of such Person during such period, determined in accordance
with GAAP, excluding, however, any gain (but not loss) during such period,
together with any related provision for taxes on such gain (but not loss),
realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period, together
with any related provision for taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets.
"NON-CONTROLLED SUBSIDIARY" means an entity which is not a Cable Controlled
Subsidiary.
"NON-RECOURSE DEBT" means Indebtedness or that portion of Indebtedness as
to which none of the Company, nor any Restricted Subsidiary: (i) provides credit
support (including any undertaking, agreement or instrument which would
constitute Indebtedness); (ii) is directly or indirectly liable; or (iii)
constitutes the lender.
"NON-RESTRICTED SUBSIDIARY" means (A) a Subsidiary that (a) at the time of
its designation by the Board of Directors as a Non-Restricted Subsidiary has not
acquired any assets (other than as specifically permitted by clause (e) of
"Permitted Investments" or Section 4.09 hereof), at any previous time, directly
or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no
Indebtedness other than Non-Recourse Debt and (c) that at the time of such
designation, after giving pro forma effect to such
8
<PAGE> 14
designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company is equal to or less than the ratio of Indebtedness to Annualized Pro
Forma EBITDA of the Company immediately preceding such designation, provided,
however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company immediately preceding such designation is 6:1 or less, then the ratio of
Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater
than such ratio immediately preceding such designation; (B) any Subsidiary which
(a) has been acquired or capitalized out of or by Equity Interests (other than
Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b)
has no Indebtedness other than Non-Recourse Debt and (c) is designated as a
Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or
consolidated with or into, or its assets or capital stock is to be transferred
to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted
Subsidiary.
"NOTES" has the meaning set forth in the preamble hereto. The Original
Notes and the Additional Notes shall be treated as a single class for all
purposes under this Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER'S CERTIFICATE" means a certificate signed by an Officer of the
Company. See Sections 10.04 and 10.05 hereof.
"OLD NOTES" means the 12 3/8% Notes, the 11 1/2% Notes, the 12 3/4% Notes,
the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4%
Notes, the 1999 9 3/4% Notes and the 9 1/2% Notes.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 10.04 and 10.05 hereof.
"ORIGINAL NOTES" means the first euro250,000,000 in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"OTHER QUALIFIED NOTES" means any outstanding senior indebtedness of the
Company issued pursuant to an indenture having a provision substantially similar
to Section 4.10 hereof (including, without limitation, the 2009 Discount Notes,
the 2009 Notes, the 123/8% Notes, the 11 1/2% Notes, the 12 3/4% Notes, the
11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4%
Notes, the 1999 9 3/4% Notes, the 9 1/2% Notes and the Diamond Notes).
"PARTICIPANT" means with respect to the Depositary, a person who has an
account with the Depositary.
"PERMITTED ACQUIRED DEBT" means, with respect to any Acquired Person
(including, for this purpose, any Non-Restricted Subsidiary at the time such
Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of
such Acquired Person and its Subsidiaries in an amount (determined on a
consolidated basis) not exceeding the sum of (x) amount of the gross book value
of property, plant and equipment of the Acquired Person and its Subsidiaries as
set forth on the most recent consolidated balance sheet of the Acquired Person
(which may be unaudited) prior to the date it becomes an Acquired Person and (y)
the aggregate amount of any Cash Equivalents held by such Acquired Person at the
time it becomes an Acquired Person.
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<PAGE> 15
"PERMITTED CURRENCY" means the lawful currency of the United States or a
European Union member.
"PERMITTED DESIGNEE" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a Permitted
Holder, his estate, heirs, executor, administrator, committee or other personal
representative or (iv) any Person so long as a Permitted Holder owns at least
50% of the voting power of all classes of the voting stock of such Person.
"PERMITTED HOLDERS" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a
Cable Controlled Property or in a Qualified Subsidiary (including, without
limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled
Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or
Guarantees or (iii) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary); (b) any Investments in Cash
Equivalents; (c) Investments by the Company in Indebtedness of a counter-party
to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that
are made, for purposes other than speculation, in connection with such contract
to hedge not more than the aggregate principal amount of the Indebtedness being
hedged (or, in the case of Indebtedness issued with original issue discount,
based on the amounts payable after the amortization of such discount); (d)
Investments by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Cable Controlled Subsidiary
or (ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance,
transfer or other conveyance of Equity Interests (other than Disqualified Stock)
in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of
the Company.
"PERMITTED LIENS" means (a) Liens in favor of the Company; (b) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not secure any property or assets of the Company or any of
its Subsidiaries other than the property or assets subject to the Liens prior to
such merger or consolidation; (c) liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or are being contested in good faith and by appropriate
proceedings; (d) Liens existing on the Issuance Date; (e) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor and (f) easements, rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties or minor
imperfections of title that, in the aggregate, are not material in amount, and
do not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Restricted Subsidiaries.
"PERMITTED NON-CONTROLLED ASSETS" means Equity Interests in any Person
primarily engaged, directly or indirectly, in one or more Cable Businesses if
such Equity Interests (x) were acquired by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale or any Investment otherwise
permitted under the terms of the Indenture and (y) to the extent that, after
giving pro forma effect to the acquisition thereof by the Company or any of its
Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of
Adjusted Total Assets based on the most recent consolidated balance sheet of the
Company.
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<PAGE> 16
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREFERRED STOCK" means the 13% Senior Redeemable Exchangeable Preferred
Stock of the Company with an original aggregate liquidation preference of
$100,000,000.
"PRO FORMA EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP after giving effect to the following: (i)
if, during or after such period, such Person or any of its Subsidiaries shall
have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries
for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Sale for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period and (ii) if,
during or after such period, such Person or any of its Subsidiaries completes an
acquisition of any Person or business which immediately after such acquisition
is a Subsidiary of such Person or whose assets are held directly by such Person
or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give
pro forma effect to the acquisition of such Person or business (without giving
effect to clause (iii) of the definition of Consolidated Net Income); and
provided further that, with respect to the Company, all of the foregoing
references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a
"Restricted Subsidiary" or "Restricted Subsidiaries" of the Company.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of November 19,
1999, between the Company and the Initial Purchasers.
"QUALIFIED SUBSIDIARY" means a Wholly Owned Subsidiary, or an entity that
will become a Wholly Owned Subsidiary after giving effect to the transaction
being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration, (i) is a Cable Business or
holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being
incurred to consummate such transaction) and (iii) has no encumbrances or
restrictions (other than such encumbrances or restrictions imposed or permitted
by this Indenture, the indentures governing the Old Notes or any other
instrument governing unsecured indebtedness of the Company which is pari passu
with the Notes) on its ability to pay dividends or make any other distributions
to the Company or any of its Subsidiaries.
"RATING AGENCIES" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's
or both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies, as the case may be, selected by
the Company, which shall be substituted for S&P or Moody's or both, as the case
may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories) and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining whether
the rating of the Notes has decreased by one or more gradations, gradations
within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the
equivalent gradations for another Rating Agency) shall be taken into account
(e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as
from BB-to B+, will constitute a decrease of one gradation).
"RATING DATE" means that date which is 90 days prior to the earlier of (x)
a Change of Control and (y) public notice of the occurrence of a Change of
Control or of the intention by the Company or any Permitted Holder to effect a
Change of Control.
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<PAGE> 17
"RATINGS DECLINE" means the occurrence of any of the following events on,
or within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of the Company or any Person to effect a
Change of Control (which period shall be extended so long as the rating of any
of the Company's debt securities is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event that any of
the Company's debt securities are rated by both of the Rating Agencies on the
Rating Date as Investment Grade, the rating of such securities by either of the
Rating Agencies shall be below Investment Grade, (b) in the event that any of
the Company's debt securities are rated by either, but not both, of the Rating
Agencies on the Rating Date as Investment Grade, the rating of such securities
by both of the Rating Agencies shall be below Investment Grade, or (c) in the
event any of the Company's debt securities are rated below Investment Grade by
both of the Rating Agencies on the Rating Date, the rating of such securities by
either Rating Agency shall be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"REDEEMABLE DIVIDEND" means, for any dividend with regard to Disqualified
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Disqualified Stock.
"REGISTERED EXCHANGE OFFER" has the meaning set forth in the Registration
Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
relating to the Notes, dated November 24, 1999, between the Company and the
Initial Purchasers and, with respect to any Additional Notes, one or more
registration rights agreements between the Company and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from time
to time, relating to rights given by the Company to the purchasers of Additional
Notes to register such Additional Notes under the Securities Act.
"REPLACEMENT ASSETS" means (w) Cable Assets, (x) Equity Interests of any
Person engaged, directly or indirectly, primarily in a Cable Business, which
Person is or will become on the date of acquisition thereof a Restricted
Subsidiary as a result of the Company's acquiring such Equity Interests, (y)
Permitted Non-Controlled Assets or (z) any combination of the foregoing.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not a
Non-Restricted Subsidiary.
"RESTRICTED SUBSIDIARY PREFERRED STOCK DIVIDEND" means, for any dividend
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory federal
income tax rate (expressed as a decimal number between 1 and 0) then applicable
to the issuer of such preferred stock.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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<PAGE> 18
"SUBORDINATED DEBENTURES" means the debentures exchangeable by the Company
for the Preferred Stock in accordance with the Certificate of Designations
therefor.
"SUBSIDIARY" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUSTEE" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"TRUST OFFICER" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary all
of the Capital Stock of which (except directors' qualifying shares) is at the
time owned directly or indirectly by the Company.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"ADDITIONAL AMOUNTS"..................................... 4.14
"AFFILIATE TRANSACTION".................................. 4.11
"AGENT MEMBER"........................................... 2.01
"ASSET SALE OFFER"....................................... 4.10
"BANKRUPTCY LAW"......................................... 6.01
"CHANGE OF CONTROL PAYMENT".............................. 4.13
"COMMENCEMENT DATE"...................................... 3.09
"COMMON DEPOSITARY"...................................... 2.03
"CUSTODIAN".............................................. 6.01
"DEFEASANCE"............................................. 8.02
"EVENT OF DEFAULT"....................................... 6.01
"EXCESS PROCEEDS"........................................ 4.10
"GLOBAL NOTE"............................................ 2.01
"INCUR".................................................. 4.08
"INITIAL NOTES".......................................... Preamble
"LEGAL HOLIDAY".......................................... 10.08
"OFFER AMOUNT"........................................... 3.09
"OFFICER"................................................ 10.10
"PAYING AGENT"........................................... 2.03
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"PAYMENT DEFAULT"........................................ 6.01
"PURCHASE DATE".......................................... 3.09
"PURCHASE OFFER"......................................... 4.13
"QIBS"................................................... 2.01
"REFINANCING INDEBTEDNESS"............................... 4.08
"REGULATION S"........................................... 2.01
"REGULATION S GLOBAL NOTES" ............................. 2.01
"REGISTRAR".............................................. 2.03
"RESTRICTED NOTES"....................................... 2.10
"RESTRICTED PAYMENTS".................................... 4.09
"RULE 144A".............................................. 2.01
"RULE 144A GLOBAL NOTES" ................................ 2.01
"TENDER PERIOD".......................................... 3.09
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "institutional trustee" means the Trustee; and
"OBLIGOR" on the Notes means the Company or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP consistently applied;
(c) references to "GAAP" shall mean GAAP in effect as of the time when
and for the period as to which such accounting principles are to be
applied;
(d) "OR" is not exclusive;
(e) words in the singular include the plural, and in the plural
include the singular;
14
<PAGE> 20
(f) provisions apply to successive events and transactions;
(g) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement or successor sections or rules
adopted by the SEC from time to time; and
(h) a reference to "$" or U.S. Dollars is to United States dollars, a
reference to "(pound)" or pounds sterling is to British pounds sterling and
a reference to "euro" or euros is to European Monetary Union euros.
ARTICLE II.
THE NOTES
SECTION 2.01 FORM AND DATING.
(a) General.
The Initial Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Exchange Notes and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit B hereto, which is hereby incorporated by reference and expressly
made a part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). The Company shall furnish
any such legend not contained in Exhibit A or Exhibit B to the Trustee in
writing. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of euro1,000 and integral multiples thereof. The terms
and provisions of the Notes set forth in Exhibit A and Exhibit B are part of
this Indenture and to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes.
The Initial Notes are being offered and sold by the Company pursuant to the
Purchase Agreement.
Initial Notes offered and sold in reliance on Regulation S under the
Securities Act ("REGULATION S"), as provided in the Purchase Agreement, shall be
issued initially in the form of one or more permanent Global Notes in
definitive, fully registered form without interest coupons with the Global Note
Legend and Regulation S Restricted Notes Legend set forth in Exhibit A hereto
(the "REGULATION S GLOBAL NOTES"). Initial Notes offered and sold to Qualified
Institutional Buyers ("QIBS") in reliance on Rule 144A under the Securities Act
("RULE 144A"), as provided in the Purchase Agreement, shall be issued initially
in the form of one or more permanent Global Notes in definitive, fully
registered form without interest coupons with the Global Notes Legend and Rule
144A Restricted Notes Legend set forth in Exhibit A hereto (in the case of Rule
144A Global Notes to be held on behalf of Euroclear, the "EUROCLEAR RULE 144A
GLOBAL NOTES," in the case of Rule 144A Global Notes to be held on behalf of
DTC, the "DTC RULE 144A GLOBAL Notes," and collectively, the "RULE 144A GLOBAL
NOTES"). The Regulation S Restricted Notes Legend and the Rule 144A Restricted
Notes Legend as set forth in Exhibit
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<PAGE> 21
A hereto are herein collectively called the "RESTRICTED NOTES LEGEND". Each
Global Note shall be deposited on behalf of the Initial Purchasers of the Notes
represented thereby with (i) in the case of Euroclear Rule 144A Global Notes and
Regulation S Global Notes to be held on behalf of Euroclear and Cedel the Common
Depositary, at its London office, as custodian for the Depositary, and
registered in the name of the Common Depositary or the nominee of the Common
Depositary for the accounts of designated agents holding on behalf of the
Depositary, and (ii) in the case of DTC Rule 144A Global Notes, with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary, in either case
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of each Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, the Common Depositary, or its nominee, and the Depositary or its
nominee as hereinafter provided.
Upon consummation of the Registered Exchange Offer, the Exchange Notes may
be issued in the form of one or more permanent Global Notes in definitive, fully
registered form without interest coupons with the Global Notes Legend but not
the Restricted Notes Legend set forth in Exhibit A hereto (i) in the case of
Euroclear Rule 144A Global Notes and Regulation S Global Notes to be held on
behalf of Euroclear and Cedel registered in the name of the Common Depositary or
a nominee of the Common Depositary, and (ii) in the case of DTC Rule 144A Global
Notes, registered in the name of the Depositary or the nominee of the
Depositary, and in either case, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of such
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee the Common Depositary or its nominee, and the
Depositary or its nominee as hereinafter provided.
After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to the Initial
Notes and pursuant thereto, all requirements for Restricted Notes Legends on
such Initial Note will cease to apply.
(c) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be
applicable to transfers of beneficial interests in the Global Notes that are
held by the Holders through Euroclear or Cedel.
(d) Book-Entry Provisions.
This Section 2.01(d) shall apply only to the Regulation S Global Notes, the
Rule 144A Global Notes and the Exchange Notes issued in the form of one or more
permanent Global Notes (collectively, the "GLOBAL NOTES") deposited with the
Common Depositary, on behalf of the Depositary or the Trustee, as custodian for
the Depositary, as applicable.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(d), authenticate and deliver initially one or more Global Notes
that (i) in the case of Euroclear Rule 144A Global Notes and Regulation S Global
Notes to be held on behalf of Euroclear and Cedel, (A) shall be registered in
the name of the Common Depositary for such Global Note or the nominee of the
Common Depositary and (B) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions to the Common Depositary as custodian
for the Depositary and (ii) in the case of DTC Rule 144A Global Notes (A) shall
be registered in the name of the Depositary or the nominee of the Depositary and
(B) shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
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<PAGE> 22
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary or by the Common Depositary or the Trustee as the
custodian of the Depositary or under such Global Note, and the Depositary may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
SECTION 2.02 EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of an
authorized officer of the Trustee. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate (1) Initial Notes for original issue up to an aggregate
principal amount stated in paragraph 6 of the Initial Notes and (2) Exchange
Notes for issue only in a Registered Exchange Offer, pursuant to the
Registration Rights Agreement, in exchange for Initial Notes for a like
principal amount. The Trustee shall, upon a written order of the Company signed
by an Officer, authenticate Additional Notes for original issue up to
euro150,000,000 aggregate principal amount. Upon original issue, Additional
Notes shall be treated as Initial Notes for all purposes of this Indenture, and
upon exchange for Notes registered under the Securities Act pursuant to a
Registered Exchange Offer, Additional Notes delivered in such exchange shall be
treated as Exchange Notes for all purposes of this Indenture. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders, the Company or an Affiliate.
SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New York,
State of New York and London, England and, if and as long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, (i) offices or agencies
where the Notes may be presented for registration of transfer or for exchange
("REGISTRAR") and (ii) offices or agencies where the Notes may be presented for
payment ("PAYING AGENT"). The Company initially designates The Chase Manhattan
Bank (London) at its offices in London to act as principal Registrar and Paying
Agent and the Trustee at its corporate trust offices in New York, New York and
Chase Manhattan Bank Luxembourg S.A. to act as a Registrar and Paying Agent. The
principal Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents in such other locations as it shall determine. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
without prior notice to any Holder. The Company shall notify the Trustee of the
name and address of any
17
<PAGE> 23
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Affiliates may act as Paying Agent or Registrar.
Initially, The Chase Manhattan Bank (London) will act as common depositary
(the "COMMON DEPOSITARY") with respect to the Euroclear Rule 144A Global Notes
and Regulation S Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
or interest on the Notes, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any money disbursed by it. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or an Affiliate
of the Company) shall have no further liability for the money. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders.
SECTION 2.06 TRANSFER AND EXCHANGE.
Where Notes are presented to the Registrar or a co-registrar with a request
to register a transfer or to exchange them for an equal principal amount of
Notes of other denominations, the Registrar shall register the transfer or make
the exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall issue and the
Trustee shall authenticate Notes at the Registrar's request. No service charge
shall be made for any registration of transfer or exchange (except as otherwise
expressly permitted herein), but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer tax or similar governmental
charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof).
The Company shall not be required (i) to issue, register the transfer of or
exchange any Note for a period beginning at the opening of business 15 days
before the day of any selection of Notes to be redeemed under Section 3.02
hereof and ending at the close of business on the day of selection, or (ii) to
register the transfer, or exchange, of any Note so selected for redemption.
(a) Notwithstanding any provision to the contrary herein, so long as a
Global Note remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Note, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Section
2.01(b) and this Section 2.06(a); provided, however, that beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the Restricted
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Notes Legend and under the heading "Transfer Restrictions" in the Company's
Offering Memorandum dated November 19, 1999.
(i) Except for transfers or exchanges made in accordance with clauses (ii)
through (iv) of this Section 2.06(a), transfers of a Global Note shall be
limited to transfers of such Global Note in whole, but not in part, to nominees
of the Depositary or to the custodians of the Depositary or nominees thereof or
to a successor of the Depositary or such successor's nominee or to custodians of
such successor Depositary or nominees thereof.
(ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a
beneficial interest in the Rule 144A Global Note deposited with the Depositary
or the Trustee as custodian for the Depositary wishes at any time to transfer
its interest in such Rule 144A Global Note to a Person who is required to take
delivery thereof in the form of an interest in the Regulation S Global Note,
such owner may, subject to the rules and procedures of the Depositary, exchange
or cause the exchange of such interest for an equivalent beneficial interest in
the Regulation S Global Notes. Upon receipt by the principal Registrar of (1)
instructions given in accordance with the Depositary's procedures from an Agent
Member directing the principal Registrar to credit or cause to be credited a
beneficial interest in the Regulation S Global Note in an amount equal to the
beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written
order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary and the
Euroclear or Cedel account to be credited with such increase and (3) a
certificate in the form of Exhibit C attached hereto given by the Holder of such
beneficial interest, then the principal Registrar shall instruct the Depositary
to reduce or cause to be reduced the principal amount of the Rule 144A Global
Note and to increase or cause to be increased the principal amount of the
Regulation S Global Note by the aggregate principal amount of the beneficial
interest in the Rule 144A Global Note equal to the beneficial interest in the
Regulation S Global Note to be exchanged or transferred, to credit or cause to
be credited to the account of the Person specified in such instructions a
beneficial interest in the Regulation S Global Note equal to the reduction in
the principal amount of the Rule 144A Global Note and to debit or cause to be
debited from the account of the Person making such exchange or transfer the
beneficial interest in the Rule 144A Global Note that is being exchanged or
transferred.
(iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a
beneficial interest in the Regulation S Global Note deposited with the
Depositary or with the Trustee as custodian for the Depositary wishes at any
time to transfer its interest in such Regulation S Global Note to a Person who
is required to take delivery thereof in the form of an interest in the Rule 144A
Global Note, such Holder may, subject to the rules and procedures of the
Depositary, exchange or cause the exchange of such interest for an equivalent
beneficial interest in the Rule 144A Global Note. Upon receipt by the principal
Registrar of (1) instructions from the Depositary, directing the principal
Registrar to credit or cause to be credited a beneficial interest in the Rule
144A Global Note equal to the beneficial interest in the Regulation S Global
Note to be exchanged or transferred, such instructions to contain information
regarding the participant account with the Depositary to be credited with such
increase, (2) a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit D attached hereto given
by the owner of such beneficial interest, then the principal Registrar
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will instruct the Depositary to reduce or cause to be reduced the Regulation S
Global Note and to increase or cause to be increased the principal amount of the
Rule 144A Global Note by the aggregate principal amount of the beneficial
interest in the Regulation S Global Note to be exchanged or transferred, and the
principal Registrar shall instruct the Depositary, concurrently with such
reduction, to credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Rule 144A Global
Note equal to the reduction in the principal amount of the Regulation S Global
Note and to debit or cause to be debited from the account of the Person making
such exchange or transfer the beneficial interest in the Regulation S Global
Note that is being exchanged or transferred.
(iv) DTC Rule 144A Global Note to Euroclear Rule 144A Global Note. If an
owner of a beneficial interest in the DTC Rule 144A Global Note deposited with
the Depositary or the Trustee as custodian for the Depositary wishes at any time
to transfer its interest in such DTC Rule 144A Global Note to a Person who is
required to take delivery thereof in the form of an interest in the Euroclear
Rule 144A Global Note, such owner may, subject to the rules and procedures of
the Depositary, exchange or cause the exchange of such interest for an
equivalent beneficial interest in the Euroclear Rule 144A Global Notes. Upon
receipt by the principal Registrar of (1) instructions given in accordance with
the Depositary's procedures from an Agent Member directing the principal
Registrar to credit or cause to be credited a beneficial interest in the
Euroclear Rule 144A Global Note in an amount equal to the beneficial interest in
the DTC Rule 144A Global Note to be exchanged, (2) a written order given in
accordance with the Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear account to be credited
with such increase and (3) a certificate in the form of Exhibit D attached
hereto given by the Holder of such beneficial interest, then the principal
Registrar shall instruct the Depositary to reduce or cause to be reduced the
principal amount of the DTC Rule 144A Global Note and to increase or cause to be
increased the principal amount of the Euroclear Rule 144A Global Note by the
aggregate principal amount of the beneficial interest in the DTC Rule 144A
Global Note equal to the beneficial interest in the Euroclear Rule 144A Global
Note to be exchanged or transferred, to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest in
the Euroclear Rule 144A Global Note equal to the reduction in the principal
amount of the DTC Rule 144A Global Note and to debit or cause to be debited from
the account of the Person making such exchange or transfer the beneficial
interest in the DTC Rule 144A Global Note that is being exchanged or
transferred.
(v) Euroclear Rule 144A Global Note to DTC Rule 144A Global Note. If an
owner of a beneficial interest in the Euroclear Rule 144A Global Note deposited
with the Depositary or with the Trustee as custodian for the Depositary wishes
at any time to transfer its interest in such Euroclear Rule 144A Global Note to
a Person who is required to take delivery thereof in the form of an interest in
the DTC Rule 144A Global Note, such Holder may, subject to the rules and
procedures of the Depositary, exchange or cause the exchange of such interest
for an equivalent beneficial interest in the DTC Rule 144A Global Note. Upon
receipt by the principal Registrar of (1) instructions from the Depositary,
directing the principal Registrar to credit or cause to be credited a beneficial
interest in the DTC Rule 144A Global Note equal to the beneficial interest in
the Euroclear Rule 144A Global Note to be exchanged or transferred, such
instructions to contain information regarding the participant account with the
Depositary to be credited with such increase, (2) a written order given in
accordance with the Depositary's
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procedures containing information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit D attached hereto given
by the owner of such beneficial interest, then the principal Registrar will
instruct the Depositary to reduce or cause to be reduced the Euroclear Rule 144A
Global Note and to increase or cause to be increased the principal amount of the
DTC Rule 144A Global Note by the aggregate principal amount of the beneficial
interest in the Euroclear Rule 144A Global Note to be exchanged or transferred,
and the principal Registrar shall instruct the Depositary, concurrently with
such reduction, to credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the DTC Rule 144A Global
Note equal to the reduction in the principal amount of the Euroclear Rule 144A
Global Note and to debit or cause to be debited from the account of the Person
making such exchange or transfer the beneficial interest in the Euroclear Rule
144A Global Note that is being exchanged or transferred.
(vi) Global Note to Restricted Note. If an owner of a beneficial interest
in a Global Note deposited with the Depositary or with the Trustee as custodian
for the Depositary wishes at any time to transfer its interest in such Global
Note to a Person who is required to take delivery thereof in the form of a
Restricted Note, such owner may, subject to the rules and procedures of the
Depositary, cause the exchange of such interest for one or more Restricted Notes
of any authorized denomination or denominations and of the same aggregate
principal amount. Upon receipt by the principal Registrar of (1) instructions
from the Depositary directing the principal Registrar to authenticate and
deliver one or more Restricted Notes of the same aggregate principal amount as
the beneficial interest in the Global Note to be exchanged, such instructions to
contain the name or names of the designated transferee or transferees, the
authorized denomination or denominations of the Restricted Notes to be so issued
and appropriate delivery instructions, (2) a certificate in the form of Exhibit
E attached hereto given by the owner of such beneficial interest to the effect
set forth therein, (3) a certificate in the form of Exhibit F attached hereto
given by the Person acquiring the Restricted Notes for which such interest is
being exchanged, to the effect set forth therein, and (4) such other
certifications, legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the principal Registrar, will instruct
the Depositary to reduce or cause to be reduced such Global Note by the
aggregate principal amount of the beneficial interest therein to be exchanged
and to debit or cause to be debited from the account of the Person making such
transfer the beneficial interest in the Global Note that is being transferred,
and concurrently with such reduction and debit the Company shall execute, and
the Trustee shall authenticate and deliver, one or more Restricted Notes of the
same aggregate principal amount in accordance with the instructions referred to
above.
(vii) Restricted Note to Restricted Note. If a Holder of a Restricted Note
wishes at any time to transfer such Restricted Note to a Person who is required
to take delivery thereof in the form of a Restricted Note, such Holder may,
subject to the restrictions on transfer set forth herein and in such Restricted
Note, cause the exchange of such Restricted Note for one or more Restricted
Notes of any authorized denomination or denominations and of the same aggregate
principal amount. Upon receipt by the principal Registrar of (1) such Restricted
Note, duly endorsed as provided herein, (2) instructions from such Holder
directing the principal Registrar to authenticate and deliver one or more
Restricted Notes of the same aggregate principal amount as the Restricted Note
to be exchanged, such instructions to contain the name or authorized
denomination
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or denominations of the Restricted Notes to be so issued and appropriate
delivery instructions, (3) a certificate from the Holder of the Restricted Note
to be exchanged in the form of Exhibit E attached hereto, (4) a certificate in
the form of Exhibit F attached hereto given by the Person acquiring the
Restricted Notes for which such interest is being exchanged, to the effect set
forth therein, and (5) such other certifications, legal opinions or other
information as the Company may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act, then the Registrar shall
cancel or cause to be canceled such Restricted Note and concurrently therewith,
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Restricted Notes of the same aggregate principal amount, in accordance
with the instructions referred to above.
(viii) Other Exchanges. In the event that a beneficial interest in a Global
Note is exchanged for Notes in definitive registered form pursuant to Section
2.10, prior to the effectiveness of a Shelf Registration Statement with respect
to such Notes, such Notes may be exchanged only in accordance with such
procedures as are substantially consistent with the provisions of clauses (ii)
and (iii) above (including the certification requirements intended to ensure
that such transfers comply with Rule 144A, Rule 144, Regulation S or any other
available exemption from registration, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(ix) Restricted Period. Prior to the termination of the Restricted Period
with respect to the issuance of the Notes, transfers of interests in the
Regulation S Global Note to "U.S. PERSONS" (as defined in Regulation S) shall be
limited to transfers to QIBs. The Company shall advise the Trustee as to the
termination of the Restricted Period and the Trustee may rely conclusively
thereon.
(b) Except in connection with a Registered Exchange Offer or a Shelf
Registration Statement contemplated by and in accordance with the terms of the
Registration Rights Agreement, if Initial Notes are issued upon the transfer,
exchange or replacement of Initial Notes bearing the Restricted Securities
Legend set forth in Exhibit A hereto, or if a request is made to remove such
Restricted Notes Legend on Initial Notes, the Initial Notes so issued shall bear
the applicable Restricted Notes Legend, or the Restricted Notes Legend shall not
be removed, as the case may be, unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel licensed to
practice law in the State of New York, as may be reasonably required by the
Company, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of Rule 144A, Rule 144, Regulation S or any other available exemption from
registration under the Securities Act or, with respect to Restricted Notes, that
such Notes are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon provision of such satisfactory evidence, the Trustee, at
the direction of the Company, shall authenticate and deliver Initial Notes that
do not bear the legend.
(c) Neither the Company nor the Trustee shall have any responsibility for
any actions taken or not taken by the Depositary and the Company shall have no
responsibility for any actions taken or not taken by the Trustee as agent or
custodian of the Depositary.
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SECTION 2.07 REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken or if such Note is mutilated and is surrendered to the Trustee,
the Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's and the Company's requirements are met. If required by the Trustee
or the Company, an indemnity bond must be sufficient in the judgment of both to
protect the Company, the Trustee, any Agent or any authenticating agent from any
loss which any of them may suffer if a Note is replaced. The Company may charge
for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, or is about to be purchased by the Company
pursuant to Article III hereof, the Company in its discretion may, instead of
issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced, paid or purchased Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, such Note ceases to be outstanding and interest on it ceases to accrue.
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES; GLOBAL NOTES.
(a) Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Holders of
temporary Notes shall be entitled to all of the benefits of this Indenture.
(b) A Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.01 shall be transferred
to the beneficial owners thereof in the form of certificated Notes only if
such transfer complies with Section 2.06 and (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for
such Global
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Note or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial owners
thereof in the form of certificated Notes pursuant to this Section 2.10
shall be surrendered by or on behalf of the Depositary to the Trustee to be
so transferred, in whole or from time to time in part, without charge, and
the Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Note, an equal aggregate principal amount of Initial
Notes of authorized denominations in the form of certificated Notes. Any
portion of a Global Note transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations ofeuro1,000
and any integral multiple thereof and registered in such names as the
Depositary shall direct. Any Initial Note in the form of certificated Notes
delivered in exchange for an interest in the Global Notes shall, except as
otherwise provided by Section 2.06(b) bear the Restricted Notes Legend set
forth in Exhibit A hereto (the "RESTRICTED NOTES").
(d) The registered Holder of a Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that
may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
(e) In the event of the occurrence of either of the events specified
in Section 2.10(b), the Company will promptly make available to the Trustee
a reasonable supply of certificated Notes in definitive, fully registered
form without interest coupons.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall promptly cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
canceled Notes as the Company directs. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it shall
pay such defaulted interest plus any interest payable on the defaulted interest,
in any lawful manner. It may pay such defaulted interest, plus any such interest
payable on it, to the Persons who are Holders on a subsequent special record
date. The Company shall fix any such record date and payment date, provided that
no such record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before any such record date, the
Company shall mail to Holders a notice that states the special record date, the
related payment date and amount of such interest to be paid.
ARTICLE III.
REDEMPTION
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the Optional Tax
Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7
of the Exchange Notes), it shall notify the Trustee of the redemption date and
the principal amount of Notes to be redeemed, and such notice shall be
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accompanied by an Officer's Certificate to the effect that the conditions to
such redemption contained herein have been complied with. The Company shall give
the notice provided for in this Section 3.01 at least 50 days before the
redemption date (unless a shorter notice period shall be satisfactory to the
Trustee).
SECTION 3.02 INTENTIONALLY OMITTED
SECTION 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address. The notice shall
identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) Intentionally Omitted;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price plus accrued interest, if any;
(f) that interest on Notes called for redemption ceases to accrue on
and after the redemption date; and
(g) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed.
At the Company's request, the Trustee shall give notice of redemption in
the Company's name and at its expense; provided that the Company shall have
delivered to the Trustee, at least 45 days prior to the redemption date, an
Officer's Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice, as provided in the preceding
paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become due and payable on the redemption date at the
price set forth in the Note. A notice of redemption may not be conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money not required
for that purpose.
SECTION 3.06 INTENTIONALLY OMITTED.
SECTION 3.07 OPTIONAL TAX REDEMPTION.
The Company may redeem all of the Notes in accordance with the Optional Tax
Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7
of the Exchange Notes). Redemption
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pursuant to this Section 3.07 shall be made pursuant to the provisions of
Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
SECTION 3.09 ASSET SALE OFFER AND PURCHASE OFFER.
(a) In the event that the Company shall commence an offer to all
Holders of the Notes to purchase Notes pursuant to Section 4.10 hereof (the
"ASSET SALE OFFER") or pursuant to Section 4.13 hereof (the "PURCHASE
OFFER"), the Company shall follow the procedures in this Section 3.09.
(b) The Asset Sale Offer or the Purchase Offer, as the case may be,
shall remain open for a period specified by the Company which shall be no
less than 30 calendar days and no more than 40 calendar days following its
commencement (the "COMMENCEMENT DATE") (as determined in accordance with
Section 4.10 or 4.13 hereof, as the case may be), except to the extent that
a longer period is required by applicable law (the "TENDER PERIOD"). Upon
the expiration of the Tender Period (the "PURCHASE DATE"), the Company
shall purchase the principal amount of Notes required to be purchased
pursuant to Section 4.10 or 4.13 hereof (the "OFFER AMOUNT") or, if less
than the Offer Amount has been tendered, all Notes tendered in response to
the Asset Sale Offer or the Purchase Offer, as the case may be.
(c) If the Purchase Date is (i) on or after an interest payment record
date and (ii) on or before the related interest payment date, any accrued
interest shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest will
be payable to Holders who tender Notes pursuant to the Asset Sale Offer or
the Purchase Offer, as the case may be.
(d) The Company shall provide the Trustee with notice of the Asset
Sale Offer or the Purchase Offer, as the case may be, at least 10 days
before the Commencement Date.
(e) On or before the Commencement Date, the Company or the Trustee (at
the expense of the Company) shall send, by first class mail, a notice to
each of the Holders, which shall govern the terms of the Asset Sale Offer
or the Purchase Offer and shall state:
(i) that the Asset Sale Offer or the Purchase Offer is being made
pursuant to this Section 3.09 and, as applicable, Section 4.10 or 4.13
hereof and the length of time the Asset Sale Offer or the Purchase Offer
will remain open;
(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.10 or 4.13 hereof) and the Purchase Date, and in the case of
a Purchase Offer made pursuant to Section 4.13 hereof, that all Notes
tendered will be accepted for payment;
(iii) that any Note or portion thereof not tendered or accepted for
payment will continue to accrue interest;
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(iv) that, unless the Company defaults in the payment of the purchase
price, any Note or portion thereof accepted for payment pursuant to the
Asset Sale Offer or the Purchase Offer will cease to accrue interest after
the Purchase Date;
(v) that Holders electing to have a Note or portion thereof purchased
pursuant to any Asset Sale Offer or Purchase Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Purchase Date;
(vi) that Holders will be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be, receives, not
later than the close of business on the second Business Day preceding the
Purchase Date, or such longer period as may be required by law, a letter or
a telegram, telex or facsimile transmission (receipt of which is confirmed
and promptly followed by a letter) setting forth the name of the Holder,
the principal amount of the Note or portion thereof the Holder delivered
for purchase and a statement that such Holder is withdrawing his election
to have the Note or portion thereof purchased;
(vii) that, in the event of an Asset Sale Offer, if the aggregate
principal amount of Notes surrendered by Holders exceeds the Offer Amount,
the Trustee will select the Notes to be purchased pro rata or by a method
that complies with the requirements of any exchange on which the Notes are
listed and that the Trustee considers fair and appropriate with such
adjustments as may be deemed appropriate by the Company so that only Notes
in denominations of euro1,000, or integral multiples thereof, shall be
purchased; and
(viii) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
In addition, the notice shall, to the extent permitted by applicable law,
be accompanied by a copy of the information regarding the Company and its
Subsidiaries which is required to be contained in the most recent Quarterly
Report on Form 10-Q or Annual Report on Form 10-K (including any financial
statements or other information required to be included or incorporated by
reference therein) and any Reports on Form 8-K filed since the date of such
Quarterly Report or Annual Report (or would have been required to file if the
Company remained a company incorporated in the United States), as the case may
be, which the Company has filed (or would have been required to file if it
remained a company incorporated in the United States) with the SEC on or prior
to the date of the notice. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer or the Purchase Offer, as the case may be.
(f) At least one Business Day prior to the Purchase Date, the Company
shall irrevocably deposit with the Trustee or a Paying Agent in immediately
available funds an amount equal to the Offer Amount to be held for payment
in accordance with the terms of this Section. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment the Notes or
portions thereof tendered pursuant to the Asset Sale Offer or the Purchase
Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to
the Trustee Notes so accepted and (iii) deliver to the Trustee an Officer's
Certificate stating such Notes or portions thereof have been accepted for
payment by the Company in accordance with the terms of this Section 3.09.
The depositary, the Paying Agent or the Company, as the case may be, shall
promptly (but in any case not later
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than ten (10) calendar days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by or on behalf of the Company to the Holder thereof. The Company
will publicly announce in a newspaper of general circulation the results of
the Asset Sale Offer or the Purchase Offer on the Purchase Date.
(g) For the purposes of calculating the allocation of available Excess
Proceeds to the Notes and each issue of Other Qualified Notes on a pro rata
basis according to accreted value or principal amount, as the case may be,
the relevant principal amount or the accreted value, as the case may be, of
the Notes and any Other Qualified Notes denominated in a currency other
than United States dollars will be notionally converted into United States
dollars from the currency the Notes and such Other Qualified Notes are
denominated in (the "BASE CURRENCY");
(i) in the case of determining the maximum principal amount or
accreted value of Notes and Other Qualified Notes that may be purchased out
of the Excess Proceeds, at the noon buying rate in the City of New York as
certified for customs purposes by the Federal Reserve Bank of New York for
cable transfers in the Base Currency (the "NOON BUYING RATE") on the
Business Day which is 10 Business Days prior to the Commencement Date; and
(ii) in the case of determining the allocation of the remaining Excess
Proceeds if the aggregate principal amount or accreted value, as the case
may be, of Notes and Other Qualified Notes surrendered by holders in the
Asset Sale Offer exceeds the remaining amount of Excess Proceeds, at the
Noon Buying Rate on the second Business Day preceding the Purchase Date.
(h) The Asset Sale Offer or the Purchase Offer shall be made by the
Company in compliance with all applicable provisions of the Exchange Act,
and all applicable tender offer rules promulgated thereunder, and shall
include all instructions and materials necessary to enable such Holders to
tender their Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay the principal of, premium, if any, and interest on,
the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent (other than the Company or an Affiliate of the Company) holds on
that date money designated for and sufficient to pay all principal and interest
then due. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i) the
overdue principal and premium, if any, at the rate borne by the Notes,
compounded semiannually; and (ii) overdue installments of interest (without
regard to any applicable grace period) at the same rate, compounded
semiannually.
SECTION 4.02 REPORTS.
Whether or not required by the rules and regulations of the SEC, so long as
any Notes are outstanding, the Company shall file with the SEC and furnish to
the Trustee and to the Holders of Notes, all quarterly and annual financial
information required to be contained in a filing with the SEC on Forms
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10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign
private issuers in the event the Company becomes a corporation organized under
the laws of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands), including a "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants, in each case, in the form required by the rules and
regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will
apply notwithstanding that the Company becomes a corporation organized under the
laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands.
SECTION 4.03 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company, an Officer's Certificate stating that a review
of the activities of the Company and its subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officer with a
view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under, and complied with the covenants and conditions
contained in, this Indenture, and further stating, as to the Officer signing
such certificate, that to the best of his knowledge the Company has kept,
observed, performed and fulfilled each and every covenant, and complied with the
covenants and conditions contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he may have knowledge) and that to
the best of his knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest, if any, on
the Notes are prohibited.
One of the Officers signing such Officer's Certificate shall be either the
Company's principal executive officer, principal financial officer or principal
accounting officer.
The Company will so long as any of the Notes are outstanding, deliver to
the Trustee, forthwith upon becoming aware of any Default or Event of Default an
Officer's Certificate specifying such Default or Event of Default.
Immediately upon the occurrence of any event giving rise to the accrual of
Special Interest (as such term is defined in Exhibit A hereto) or the cessation
of such accrual, the Company shall give the Trustee notice thereof and of the
event giving rise to such accrual or cessation (such notice to be contained in
an Officer's Certificate) and prior to receipt of such Officer's Certificate the
Trustee shall be entitled to assume that no such accrual has commenced or
ceased, as the case may be.
SECTION 4.04 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.05 CORPORATE EXISTENCE.
Subject to Article V hereof, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each subsidiary
of the Company in accordance with the respective organizational documents
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of each subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any subsidiary, if the Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders. The Company shall notify the Trustee in writing of any
subsidiary which qualifies as a Material Subsidiary and is not specified in
clause (i) of the definition thereof.
SECTION 4.06 TAXES.
The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings.
SECTION 4.07 LIMITATIONS ON LIENS.
Neither the Company nor any of its Restricted Subsidiaries may, directly or
indirectly create, incur, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except:
(a) Permitted Liens;
(b) Liens securing Indebtedness and related obligations to the extent
such Indebtedness and related obligations are permitted under Sections
4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof;
(c) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under Section 4.08 hereof; and
(d) Liens securing Refinancing Indebtedness permitted to be incurred
under Section 4.08 hereof; provided that the Refinancing Indebtedness so
issued and secured by such Lien shall not be secured by any property or
assets of the Company or any of its Restricted Subsidiaries other than the
property or assets subject to the Liens securing such Indebtedness being
refinanced.
SECTION 4.08 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable with respect to
(collectively, "INCUR") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock that is
Disqualified Stock; provided, however, that the Company may incur
Indebtedness or issue shares of Disqualified Stock and any of its
Restricted Subsidiaries may issue shares of preferred stock that is
Disqualified Stock if after giving effect to such issuance or incurrence on
a pro forma basis, the sum of (x) Indebtedness of the Company and its
Restricted Subsidiaries, on a consolidated basis, (y) the liquidation value
of outstanding preferred stock of Restricted Subsidiaries and (z) the
aggregate amount payable by the Company and its Restricted Subsidiaries, on
a consolidated basis, upon redemption of Disqualified Stock to the extent
such amount is not included in the preceding clause (y) shall be less than
the product of Annualized Pro Forma EBITDA for the latest fiscal quarter
for which internal financial statements are available immediately preceding
the date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued multiplied by 7.0,
determined on a pro forma basis (including a pro forma application of the
net
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proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock or preferred stock had been issued, as the case
may be, at the beginning of such quarter.
(b) The foregoing limitations in Section 4.08(a) shall not apply to:
(i) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness pursuant to the Credit Facility;
(ii) the issuance by any Restricted Subsidiary of preferred stock
(other than Disqualified Stock) to the Company, any Restricted Subsidiary
of the Company or the holders of Equity Interests in any Restricted
Subsidiary on a pro rata basis to such holders;
(iii) the incurrence of Indebtedness or the issuance of preferred
stock by the Company or any of its Restricted Subsidiaries the proceeds of
which are (or the credit support provided by any such Indebtedness is), in
each case, used to finance the construction, capital expenditure and
working capital needs of a Cable Business (including, without limitation,
payments made pursuant to any License), the acquisition of Cable Assets or
the Capital Stock of a Qualified Subsidiary;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
not to exceed $100.0 million at any time;
(v) the incurrence by the Company or any Restricted Subsidiary of any
Permitted Acquired Debt;
(vi) the incurrence by the Company or any Subsidiary of Indebtedness
issued in exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, or refund the Notes, the 2009 Discount Notes,
the 2009 Notes, Existing Indebtedness or Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness incurred
pursuant to Section 4.08(a) hereof (the "REFINANCING INDEBTEDNESS");
provided, however, that (1) the principal amount of, and any premium
payable in respect of, such Refinancing Indebtedness shall not exceed the
principal amount of Indebtedness so extended, refinanced, renewed, replaced
or refunded (plus the amount of reasonable expenses incurred in connection
therewith); (2) the Refinancing Indebtedness shall have (A) a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of the Indebtedness being extended, refinanced, renewed,
replaced or refunded, and (B) a stated maturity no earlier than the stated
maturity of, the Indebtedness being extended, refinanced, renewed, replaced
or refunded; and (3) the Refinancing Indebtedness shall be subordinated in
right of payment to the Notes as and to the extent of the Indebtedness
being extended, refinanced, renewed, replaced or refunded;
(vii) the issuance of the Preferred Stock in lieu of payment of cash
interest on the Subordinated Debentures or the incurrence by the Company of
Indebtedness represented by the Subordinated Debentures upon the exchange
of the Preferred Stock in accordance with the Certificate of Designations
therefor;
(viii) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts are related to payment obligations under Existing
Indebtedness or Indebtedness incurred under Section 4.08(a) or (b) hereof
that are being hedged
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thereby, and not for speculation and that the aggregate notional amount
under each such Exchange Rate Contract does not exceed the aggregate
payment obligations under such Indebtedness;
(ix) Indebtedness under Interest Rate Agreements, provided that the
obligations under such agreements are related to payment obligations on
Existing Indebtedness or Indebtedness otherwise incurred pursuant to
Section 4.08(a) or (b) hereof, and not for speculation;
(x) the incurrence of Indebtedness between the Company and any
Restricted Subsidiary, between or among Restricted Subsidiaries and between
any Restricted Subsidiary and other holders of Equity Interests of such
Restricted Subsidiary (or other Persons providing funding on their behalf)
on a pro rata basis and on substantially identical principal financial
terms; provided, however, that if any such Restricted Subsidiary that is
the payee of any such Indebtedness ceases to be a Restricted Subsidiary or
transfers such Indebtedness (other than to the Company or a Restricted
Subsidiary of the Company), such events shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the Company or by a
Restricted Subsidiary, as the case may be, at the time of such event; and
(xi) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of performance bonds of the Company or any Subsidiary or surety
bonds provided by the Company or any Restricted Subsidiary received in the
ordinary course of business in connection with the construction or
operation of a Cable Business.
(c) Any redesignation of a Non-Restricted Subsidiary as a Restricted
Subsidiary shall be deemed for purposes of this Section 4.08 to be an
incurrence of Indebtedness by the Company and its Restricted Subsidiaries
of the Indebtedness of such Non-Restricted Subsidiary as of the time of
such redesignation to the extent such Indebtedness does not already
constitute Indebtedness of the Company or one of its Restricted
Subsidiaries.
SECTION 4.09 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
the Company's or any of its Restricted Subsidiaries' Equity Interests
(other than (x) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or such Restricted
Subsidiary, (y) dividends or distributions payable to the Company or any
Wholly Owned Subsidiary of the Company, or (z) pro rata dividends or pro
rata distributions payable by a Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company (other than any such Equity Interests owned
by the Company or any Wholly Owned Subsidiary of the Company);
(iii) voluntarily purchase, redeem or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes; or
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(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "RESTRICTED PAYMENTS"), unless, at the time of such
Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (including Restricted Payments permitted by clauses
(ii) through (x) of Section 4.09(b)), is less than the sum of (x) the
difference between Cumulative EBITDA and 1.5 times Cumulative Interest
Expense plus (y) Capital Stock Sale Proceeds plus (z) cash received by the
Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other
than cash which is or is required to be repaid or returned to such
Non-Restricted Subsidiary); provided, however, that to the extent that any
Restricted Investment that was made after the date of this Indenture is
sold for cash or otherwise liquidated or repaid for cash, the amount
credited pursuant to this clause (z) shall be the lesser of (A) the cash
received with respect to such sale, liquidation or repayment of such
Restricted Investment (less the cost of such sale, liquidation or
repayment, if any) and (B) the initial amount of such Restricted
Investment, in each case as determined in good faith by the Company's Board
of Directors.
(b) The foregoing provisions in Section 4.09(a) shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) (x) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of the Company or any Restricted Subsidiary or (y)
an Investment in any Person, in each case, in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of other Equity Interests (other than any
Disqualified Stock) of the Company, provided that the Company delivers to
the Trustee:
(1) with respect to any transaction involving in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officer's
Certificate certifying that such transaction is approved by a majority of
the directors on the Board of Directors; and
(2) with respect to any transaction involving in excess of $25.0
million, an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking
firm of national standing with high yield experience, together with an
Officer's Certificate to the effect that such opinion complies with this
clause (2);
(iii) Investments by the Company or any Restricted Subsidiary in a
Non-Controlled Subsidiary which (A) has no Indebtedness on a consolidated
basis other than Indebtedness incurred to finance the purchase of equipment
used in a Cable Business, (B) has no restrictions (other than restrictions
imposed or permitted by this Indenture or the indentures governing the
Other Qualified Notes or any other instrument governing unsecured
indebtedness of the Company which is pari passu with the Notes) on its
ability
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to pay dividends or make any other distributions to the Company or any of
its Restricted Subsidiaries, (C) is or will be a Cable Business and (D)
uses the proceeds of such Investment for constructing a Cable Business or
the working capital needs of a Cable Business;
(iv) the redemption, purchase, defeasance, acquisition or retirement
of Indebtedness that is subordinated to the Notes (including premium, if
any, and accrued and unpaid interest) made by exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of (A) Equity Interests of the Company or (B)
Refinancing Indebtedness permitted to be incurred under Section 4.08
hereof;
(v) Investments by the Company or any Restricted Subsidiary in a
Non-Controlled Subsidiary which is or will be a Cable Business in an amount
not to exceed $100.0 million in the aggregate plus the sum of (x) cash
received by the Company or a Restricted Subsidiary from a Non-Restricted
Subsidiary (other than cash which s or is required to be repaid or returned
to such Non-Restricted Subsidiary) and (y) Capital Stock Sale Proceeds
(excluding the aggregate net sale proceeds to be received upon conversion
of the Convertible Subordinated Notes);
(vi) Investments by the Company or any Restricted Subsidiary in
Permitted Non-Controlled Assets;
(vii) Investments by the Company or any Restricted Subsidiary in SDN
Limited, a joint venture organized to operate a digital terrestrial
television multiplex, in an amount not exceeding (pound)11.4 million.
(viii) the extension by the Company or any Restricted Subsidiary of
trade credit to a Non-Restricted Subsidiary extended on usual and customary
terms in the ordinary course of business, provided that the aggregate
amount of such trade credit shall not exceed $25.0 million at any one time;
(ix) the payment of cash dividends on the Preferred Stock accruing on
or after February 15, 2004 or any mandatory redemption or repurchase of the
Preferred Stock, in each case, in accordance with the Certificate of
Designations therefor; and
(x) the exchange of all of the outstanding shares of Preferred Stock
for Subordinated Debentures in accordance with the Certificate of
Designations for the Preferred Stock.
(c) Any Investment in a Subsidiary (other than the issuance, transfer
or other conveyance of Equity Interests of the Company (or any Capital
Stock Sale Proceeds therefrom)) that is designated by the Board of
Directors as a Non-Restricted Subsidiary shall become a Restricted Payment
made on the date of such designation in the amount of the greater of (x)
the book value of such Subsidiary on the date such Subsidiary becomes a
Non-Restricted Subsidiary and (y) the fair market value of such Subsidiary
on such date as determined (A) in good faith by the Board of Directors of
such Subsidiary if such fair market value is determined to be less than
$25.0 million and (B) by an investment banking firm of national standing
with high yield underwriting expertise if such fair market value is
determined to be in excess of $25.0 million.
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(d) Not later than the fifth Business Day after making any Restricted
Payment (other than those referred to in sub-clause (viii) of Section
4.09(b)), the Company shall deliver to the Trustee an Officer's Certificate
stating that such Restricted Payment is permitted and setting forth the
basis upon which the calculations required by this Section 4.09 were
computed, which calculations may be based upon the Company's latest
available financial statements.
SECTION 4.10 ASSET SALES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to cause, make or suffer to exist any Asset Sale, unless:
(i) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale;
(ii) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced for purposes of this Section 4.10 by a
resolution of the Board of Directors set forth in an Officer's Certificate
delivered to the Trustee) of the assets sold or otherwise disposed of; and
(iii) at least 80% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of (w) Cash
Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests
of a Person who is, directly or indirectly, engaged primarily in one or
more Cable Businesses; provided, however, that the Company or such
Restricted Subsidiary shall Monetize such Equity Interests by sale to one
or more Persons (other than to the Company or a Subsidiary thereof) at a
price not less than the fair market value thereof within 180 days of the
consummation of such Asset Sale, or (z) any combination of the foregoing
clauses (w) through (y); provided, however, that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such
assets and (y) any notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are within five
Business Days converted by the Company or such Restricted Subsidiary into
cash, shall be deemed to be Cash Equivalents (to the extent of the Cash
Equivalents received in such conversion) for purposes of this clause (iii).
(b) Within 360 days after any Asset Sale, the Company (or the
Restricted Subsidiary, as the case may be) shall cause the Net Proceeds
from such Asset Sale:
(i) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary; or
(ii) to be invested or reinvested in Replacement Assets.
Pending final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture or the
indentures for the Other Qualified Notes.
Any Net Proceeds from any Asset Sale that are not used or reinvested as
provided in the preceding sentence constitute "EXCESS PROCEEDS." When the
aggregate amount of Excess Proceeds
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exceeds $15 million, the Company shall make an offer (an "ASSET SALE OFFER") to
all holders of Notes and Other Qualified Notes to purchase the maximum principal
amount of Notes and Other Qualified Notes (determined on a pro rata basis
according to the accreted value or principal amount, as the case may be, of the
Notes and the Other Qualified Notes and in accordance with Section 3.09(g)(i))
that may be purchased out of the Excess Proceeds (x) with respect to the Other
Qualified Notes, based on the terms set forth in the indenture related to each
issue of the Other Qualified Notes and (y) with respect to the Notes, at an
offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in
Section 3.09 hereof. To the extent that the aggregate principal amount or
accreted value, as the case may be, of Notes and Other Qualified Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes. If the aggregate
principal amount or accreted value, as the case may be, of Notes and Other
Qualified Notes surrendered by holders thereof exceeds the amount of Excess
Proceeds, then such remaining Excess Proceeds shall be allocated pro rata
according to accreted value or principal amount, as the case may be, to the
Notes and each issue of the Other Qualified Notes and in accordance with Section
3.09(g)(ii), and the Trustee shall select the Notes to be purchased from the
amount allocated to the Notes on the basis set forth in Section 3.09(e) hereof.
Upon completion of such offers to purchase each of the Notes and the Other
Qualified Notes, the amount of Excess Proceeds will be reset at zero.
(c) Notwithstanding the provisions of Sections 4.10(a) and (b): the
Company and its Subsidiaries may:
(i) sell, lease, transfer, convey or otherwise dispose of assets or
property acquired after October 14, 1993, by the Company or any Subsidiary
in a sale-and-leaseback transaction so long as the proceeds of such sale
are applied within five Business Days to permanently reduce Indebtedness of
a Restricted Subsidiary or if there is no such Indebtedness or such
proceeds exceed the amount of such Indebtedness then such proceeds or
excess proceeds are reinvested in a Replacement Assets within 360 days
after such sale, lease, transfer, conveyance or disposition;
(ii) (x) swap or exchange assets or property with a Cable Controlled
Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise dispose
of equity securities of any of the Company's Subsidiaries to a Cable
Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company after
such transaction is equal to or less than the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company immediately preceding such
transaction; provided, however, that if the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company immediately preceding such
transaction is 6:1 or less, then the ratio of Indebtedness to Annualized
Pro Forma EBITDA of the Company may be 0.5 greater than such ratio
immediately preceding such transaction and (B) either (I) the assets so
contributed consist solely of a license to operate a Cable Business and the
Net Households covered by all of the licenses to operate cable and
telephone systems held by the Company and its Restricted Subsidiaries
immediately after and giving effect to such transaction equals or exceeds
the number of Net Households covered by all of the licenses to operate
cable and telephone systems held by the Company and its Restricted
Subsidiaries immediately prior to such transaction or (II) the assets so
contributed consist solely of Cable Assets and the value of the Capital
Stock received, immediately after and giving effect to such transaction, as
determined by an investment banking firm of recognized standing with
knowledge of the Cable Business, equals or exceeds the value of Cable
Assets exchanged for such Capital Stock; or
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(iii) issue, sell, lease, transfer, convey or otherwise dispose of
Equity Interests (other than Disqualified Stock) of the Company (or any
Capital Stock Sale Proceeds therefrom) to any Person (including
Non-Restricted Subsidiaries).
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or amend any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Subsidiary than those that could have been
obtained in a comparable transaction by the Company or such Subsidiary with
an unrelated Person and
(b) the Company delivers to the Trustee:
(i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $1.0 million or any series of Affiliate Transactions
with an Affiliate involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with Section 4.11 (a)
and such Affiliate Transaction is approved by a majority of the
disinterested directors on the Board of Directors; and
(ii) with respect to any Affiliate Transaction or any series of
Affiliate Transactions involving aggregate payments in excess of $25.0
million, an opinion as to the fairness to the Company or such Subsidiary
from a financial point of view issued by an investment banking firm of
national standing with high yield experience together with an Officer's
Certificate to the effect that such opinion complies with this clause (ii);
provided, however, that notwithstanding the foregoing provisions, the
following shall not be deemed to be Affiliate Transactions:
(1) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or its predecessor or such Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) transactions permitted by the provisions of Section 4.09 hereof;
(4) Liens permitted under Section 4.07 hereof which are granted by the
Company or any of its Subsidiaries to an unrelated Person for the benefit
of the Company or any other Subsidiary of the Company;
(5) any transaction pursuant to an agreement in effect on the Issuance
Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary where
such Indebtedness is owed to the holders of the Equity Interests of such
Restricted Subsidiary on a pro rata basis and on substantially identical
principal financial terms;
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(7) management, operating, service or interconnect agreements entered
into in the ordinary course of business with any Cable Business in which
the Company or any Restricted Subsidiary has an Investment and which is not
a Cable Controlled Subsidiary (and of which no Affiliate of the Company is
an Affiliate other than as a result of such Investment); and
(8) any tax sharing agreement.
SECTION 4.12 DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to
any other interest or participation in, or measured by, its profits, or
(ii) pay any indebtedness owed to the Company or any of its Subsidiaries,
or
(b) make loans or advances to the Company or any of its Subsidiaries,
or
(c) transfer any of its properties or assets to the Company or any of
its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of:
(i) Existing Indebtedness as in effect on the Issuance Date;
(ii) this Indenture, the Notes, the indentures relating to the 2009
Discount Notes and the 2009 Notes, the 2009 Discount Notes and the 2009
Notes;
(iii) any agreement covering or relating to Indebtedness permitted to
be incurred under Section 4.08(b)(i), (ii), (iii), (iv), (v), (viii) or
(ix) hereof (but only, in the case of Section 4.08(b)(viii) or (ix), to the
extent contemplated by the then-existing Credit Facility), provided that
the provisions of such agreement permit any action referred to in clause
(a) above in aggregate amounts sufficient to enable the payment of interest
and principal and mandatory repurchases pursuant to the terms of this
Indenture and the Notes, but provided further that: (x) any such agreement
may nevertheless encumber, prohibit or restrict any action referred to in
clause (a) above if an event of default under such agreement has occurred
and is continuing or would occur as a result of any such action; and (y)
any such agreement may nevertheless contain (I) restrictions limiting the
payment of dividends or the making of any other distributions to all or a
portion of excess cash-flow (or any similar formulation thereof) and (II)
subordination provisions governing Indebtedness owed to the Company or any
Restricted Subsidiary;
(iv) applicable law;
(v) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Subsidiaries as in effect at the time
of such acquisition (except to the extent such Indebtedness was incurred in
connection with such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the
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Person, so acquired; provided that the EBITDA of such Person is not taken
into account in determining whether such acquisition was permitted by the
terms of this Indenture;
(vi) customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(vii) provisions of joint venture or stockholder agreements, so long
as such provisions are determined by a resolution of the Board of Directors
to be, at the time of such determination, customary for such agreements;
(viii) with respect to clause (c) above, purchase money obligations
for property acquired in the ordinary course of business or the provisions
of any agreement with respect to any Asset Sale (or transaction which, but
for its size, would be an Asset Sale), solely with respect to the assets
being sold; or
(ix) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Refinancing
Indebtedness are determined by a resolution of the Board of Directors to be
no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
SECTION 4.13 CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control Triggering Event, each
Holder of Notes shall have the right to require the Company to repurchase
all or any part (equal to euro1,000 or an integral multiple thereof) of
such Holder's Notes pursuant to the offer described in Section 3.09 hereof
(the "PURCHASE OFFER") at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the
date of purchase (the "CHANGE OF CONTROL PAYMENT").
(b) Within 40 days following any Change of Control Triggering Event,
the Company shall mail to each Holder the notice provided by Section
3.09(e) and if and so long as the Notes are listed on the Luxembourg Stock
Exchange publish a notice in one leading newspaper with circulation in
Luxembourg.
SECTION 4.14 PAYMENT OF ADDITIONAL AMOUNTS.
At least 10 days prior to the first date on which payment of principal and
any premium or interest on the Notes is to be made, and at least 10 days prior
to any subsequent such date if there has been any change with respect to the
matters set forth in the Officer's Certificate described in this Section 4.14,
the Company shall furnish the Trustee and the Paying Agent, if other than the
Trustee, with an Officer's Certificate instructing the Trustee and the Paying
Agent whether the Company is obligated to pay Additional Amounts (as defined in
Section 3 of the Initial Notes or Section 2 of the Exchange Notes) with respect
to such payment of principal, or of any premium or interest on the Notes. If the
Company will be obligated to pay Additional Amounts with respect to such
payment, then such Officer's Certificate shall specify by country the amount, if
any, required to be withheld on such payments to such Holders and the Company
will pay to the Trustee or the Paying Agent such Additional Amounts. The Company
shall indemnify the Trustee and the Paying Agent for, and hold them harmless
against, any loss, liability or expense reasonably incurred without negligence
or bad faith on their part arising out of or in connection with actions taken or
omitted by any of them in reliance on any Officer's Certificate furnished to
them pursuant to this Section 4.14.
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Whenever in this Indenture there is mentioned, in any context, the payment
of principal (and premium, if any), Offer Amount, interest or any other amount
payable under or with respect to any Note such mention shall be deemed to
include mention of the payment of Additional Amounts provided for in this
Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange
Notes) to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to the provisions of this Section
4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and
express mention of the payment of Additional Amounts (if applicable) in any
provisions hereof shall not be construed as excluding Additional Amounts in
those provisions hereof where such express mention is not made (if applicable).
ARTICLE V.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another corporation, Person or entity
unless:
(a) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of
the United States, any state thereof or the District of Columbia;
(b) the entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will
have been made assumes all the Obligations (including the due and punctual
payment of Additional Amounts if the surviving corporation is a corporation
organized or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of
the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Notes and this Indenture;
(c) immediately after such transaction no Default or Event of Default
exists;
(d) the Company or any entity or Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made will have a
ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding the transaction; provided, however, that if the ratio
of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately
preceding such transaction is 6:1 or less, then the ratio of Indebtedness
to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such
ratio immediately preceding such transaction; and
(e) such transaction would not result in the loss of any material
authorization or Material License of the Company or its Subsidiaries.
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SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
Person has been named as the Company herein; provided, however, that the
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Notes.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest (and Additional
Amounts, if applicable) on any Note when the same becomes due and payable
and the Default continues for a period of 30 days after the date due and
payable;
(b) the Company defaults in the payment of the principal of any Note
when the same becomes due and payable, upon redemption or otherwise;
(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.08, 4.09, or 4.13 hereof;
(d) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Notes, required by any of them
to be performed and the Default continues for a period of 60 days after
notice from the Trustee to the Company or from the Holders of 25% in
aggregate principal amount of the then outstanding Notes to the Company and
the Trustee stating that such notice is a "Notice of Default";
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Restricted Subsidiary
(or the payment of which is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the Issuance Date, which default:
(i) is caused by a failure to pay when due principal of or interest on
such Indebtedness within the grace period provided for in such Indebtedness
(which failure continues beyond any applicable grace period) (a "PAYMENT
DEFAULT"); or
(ii) results in the acceleration of such Indebtedness prior to its
express maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there is a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
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(f) a final judgment or final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) for the
payment of money are entered by a court or courts of competent jurisdiction
against the Company or any Restricted Subsidiary of the Company which
remains undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
judgments exceeds $5.0 million;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case in which it is the debtor;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) generally is unable to pay its debts as the same become due;
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Material Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any Material Subsidiary or
for all or substantially all of its property; or
(iii) orders the liquidation of the Company or any Material
Subsidiary, and the order or decree remains unstayed and in effect for 60
days; and
(i) the revocation of a Material License.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors or the protection
of creditors. The term "CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
SECTION 6.02 ACCELERATION.
If an Event of Default (other than an Event of Default specified in clauses
(g) and (h) of Section 6.01 hereof) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes by notice to the Company and the Trustee, may declare all
the Notes to be due and payable. Upon such declaration, the principal of,
premium, if any, and interest on, the Notes shall be due and payable
immediately. If an Event of Default specified in clause (g) or (h) of Section
6.01 hereof occurs, such an amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the then
outstanding Notes by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if
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all existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration.
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal or interest on the Notes or
to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then outstanding Notes
by notice to the Trustee may waive an existing Default or Event of Default and
its consequences except a continuing Default or Event of Default in the payment
of the principal of, or interest on any Note. When a Default or Event of Default
is waived, it is cured and ceases; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, is unduly prejudicial to the rights of other Holders, or
would involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder gives to the Trustee notice of a continuing Event of
Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
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SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder made pursuant to this
Section.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of principal and
interest remaining unpaid on the Notes and interest on overdue principal and
interest and such further amount as shall be sufficient to cover the costs and,
to the extent lawful, expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Notes for principal
and interest (and Additional Amounts, if applicable), ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders made pursuant to this Section.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
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ARTICLE VII.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in
this Indenture and no others and (ii) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture and to confirm the correctness of all mathematical
computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable
for any error of judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining the pertinent
facts and (iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money
held in trust by the Trustee need not be segregated from other funds except
to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel, or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officer's Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or
(b) if the Trustee does not act as Paying Agent) of Section 6.01 or of the
identity of any Material Subsidiary referred to in clause (ii) of the
definition thereof unless either (1) a Trust Officer of the Trustee
assigned to its Corporate Trustee Administration Department shall have
actual knowledge thereof, or (2) the Trustee shall have received notice
thereof in accordance with Section 10.02 hereof from the Company or any
Holder.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or an Affiliate with
the same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, it shall not be accountable for the Company's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Company in the Indenture or any statement in the Notes other than its
authentication or for compliance by the Company with the Registration Rights
Agreement.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 10.10, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each stock exchange on which the Notes are listed. The Company
shall notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it. Such disbursements and expenses
may include the reasonable disbursements, compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it
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may seek indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees, disbursements and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Notes on all money or property held or collected
by the Trustee, except money or property held in trust to pay principal and
interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
All amounts owing to the Trustee under this Section shall be payable by the
Company in United States dollars.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide Holder of a Note for at least
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six months may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08 hereof,
the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring trustee with respect to expenses and liabilities
incurred by it prior to such replacement.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1) and (5). The Trustee shall always have a combined
capital and surplus as stated in Section 10.11 hereof. The Trustee is subject to
TIA Section 310(b). The following indentures shall be deemed to be specifically
described herein for the purposes of clause (i) of the first proviso contained
in TIA Section 310(b): (a) indenture, dated as of April 20, 1995, between the
Company and The Chase Manhattan Bank, as trustee, relating to the 12 3/4% Notes,
as amended, (b) indenture, dated as of January 30, 1996, between the Company and
The Chase Manhattan Bank, as trustee, relating to the 11 1/2% Deferred Coupon
Notes, as amended, (c) indenture, dated as February 12, 1997, between the
Company and The Chase Manhattan Bank, as trustee, relating to the 10% Notes, as
amended, (d) indenture dated as of March 13, 1998, between the Company and The
Chase Manhattan Bank, as trustee, relating to the Company's 9 1/2% Notes, (e)
indenture, dated as of March 13, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to the Company's 10 3/4% Notes, (f)
indenture, dated as of March 13, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to Company's the 9 3/4% Notes, (g)
indenture, dated as of November 2, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to the Company's 11 1/2% Notes, (h)
indenture dated as of November 6, 1998 between the Company and The Chase
Manhattan Bank, as Trustee, relating to the 12 3/8% Deferred Coupon Notes, (i)
indenture dated as of April 14, 1999 between the Company and The Chase Manhattan
Bank, as Trustee, relating to the Company's 1999 9 3/4 Notes, (j) indenture
dated as of November 24, 1999 between the Company and The Chase Manhattan Bank,
as Trustee, relating to the Company's 2009 Discount Notes, and (k) indenture
dated as of November 24, 1999 between the Company and The Chase Manhattan Bank,
as Trustee, relating to the Company's 2009 Notes.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE VIII.
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
SECTION 8.02 OPTION TO EFFECT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officer's Certificate, at any time, elect to have
this Section 8.02 be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Section. Upon the Company's election to have
this Section 8.02 apply to all the outstanding Notes, the Company shall, subject
to the satisfaction of the conditions set forth in the next paragraph, be deemed
to have been discharged from its obligations with respect to all outstanding
Notes on the date such conditions are satisfied (hereinafter, "DEFEASANCE"). For
this purpose, Defeasance means that the Company shall be deemed to have paid and
discharged the entire Obligations represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.03 hereof and the other Sections of this Indenture referred to in clauses (a)
and (b) below, and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in the following paragraph, payments in
respect of the principal of and interest on such Notes when such payments are
due; (ii) the Company's obligations with respect to such Notes under Article II
hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith; and (iv) this
Article VIII.
In order to exercise Defeasance:
(a) the Company must irrevocably deposit or cause to be deposited with
the Trustee or the Paying Agent, at any time prior to the maturity date of
the Notes, in trust, for the benefit of the Holders, pursuant to an
irrevocable trust and security agreement in form satisfactory to the
Trustee, as trust funds in trust, legal tender in the countries
constituting the European Monetary Union sufficient, EEA Government
Obligations, the principal of and interest on which will be sufficient, or
a combination thereof sufficient, in the opinion of a nationally recognized
firm of independent public accountants, expressed in a written
certification thereof (in form satisfactory to the Trustee) to pay the
principal of, premium, if any, and interest, if any, on the outstanding
Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, of such principal or installment of
principal of, premium, if any, and interest, if any, on the outstanding
Notes;
(b) the Company shall have delivered to the Trustee, an Opinion of
Counsel (which counsel may be an employee of the Company) reasonably
acceptable to the Trustee confirming that: (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the Issuance Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Defeasance and will be subject to
federal income
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<PAGE> 55
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Defeasance had not occurred;
(c) no Event of Default shall have occurred and be continuing on the
date of such Defeasance (other than an Event of Default resulting from or
related to the incurrence of Indebtedness, the proceeds of which are to be
applied to such deposit) or, insofar as Sections 6.01(g) and (h) hereof are
concerned, at any time in the period ending on the 91st day after the date
of deposit (or greater period of time in which any such deposit of trust
funds may remain subject to the effect of any Bankruptcy Law insofar as
those apply to the deposit by the Company);
(d) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument (other
than this Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound;
(e) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit (or
such greater period referred to in (c) above), the trust funds will not be
subject to the effect of any applicable Bankruptcy Law;
(f) the Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over any other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(g) the deposit shall not result in the Company, the Trustee or the
trust fund established pursuant to (a) above being subject to regulation
under the Investment Company Act of 1940, as amended;
(h) Holders of the Notes will have a valid, perfected and unavoidable
(under applicable Bankruptcy Law), subject to the passage of time referred
to clause (e) above, first priority security interest in the trust funds;
and
(i) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (subject to customary exceptions),
each stating that all conditions precedent provided for or relating to the
Defeasance have been complied with.
SECTION 8.03 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust, money (in the form of legal tender in the
countries constituting the European Monetary Union) or EEA Government
Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply
the deposited money (in the form of legal tender in the countries constituting
the European Monetary Union) and the money from EEA Government Obligations
through the Paying Agent and in accordance with this Indenture to the payment of
principal and interest, if any, on the Notes.
SECTION 8.04 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request any
money held by them for the payment of principal or interest that remains
unclaimed for two years after the date upon which such payment shall have become
due; provided, however, that the Company shall have first caused
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<PAGE> 56
notice of such payment to the Company to be mailed to each Holder entitled
thereto no less than 30 days prior to such payment. After payment to the
Company, the Trustee and the Paying Agent shall have no further liability with
respect to such money and Holders entitled to the money must look to the Company
for payment as general creditors unless any applicable abandoned property law
designates another Person.
SECTION 8.05 REINSTATEMENT.
If (i) the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.03 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application and (ii) the Holders of at least a majority in principal amount
of the then outstanding Notes so request by written notice to the Trustee, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 hereof
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.03 hereof or such request is revoked by such
Holders; provided, however, that if the Company makes any payment of interest on
or principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or the
Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 5.01 hereof;
(c) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(d) to make any change that does not adversely affect the interests
hereunder of any Holder;
(e) to qualify the Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA; or
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture.
SECTION 9.02 WITH CONSENT OF HOLDERS.
Subject to Section 6.07 hereof, the Company and the Trustee may amend or
supplement this Indenture or the Notes with the written consent of the Holders
of at least a majority in principal amount of the then outstanding Notes.
Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in principal
amount of the Notes then outstanding (including Additional Notes, if any) may
also waive compliance in a particular instance by the Company with any provision
of this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment, supplement or waiver under this Section may not:
(a) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions of Sections 7 and 8 of the Initial Note and
Sections 6 and 7 of the Exchange Note (other than provisions relating to
the covenants described under Sections 4.10 and 4.13);
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a default in the payment of the principal of, or interest,
if any, on, any Note (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the
Notes and a waiver of the payment default that resulted from such
acceleration);
(e) except as contemplated by Section 10.07(e), make any Note payable
in money other than that stated in the Note;
(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption payment with respect to any Note; or
(h) make any change in the foregoing amendment and waiver provisions
of this Article 9.
To secure a consent of the Holders under this Section 9.02, it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Holders a notice briefly describing the
amendment or waiver.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his Note or portion of a Note if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officer's Certificate
certifying that the Holders of the requisite principal amount of Notes have
consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Notes required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day period.
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After an amendment, supplement or waiver becomes effective it shall bind
every Holder, unless it is of the type described in any of clauses (a) through
(h) of Section 9.02 hereof. In such case, the amendment or waiver shall bind
each Holder who has consented to it and every subsequent Holder that evidences
the same debt as the consenting Holder's Note.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or waiver
on any Note thereafter authenticated. The Company in exchange for all Notes may
issue and the Trustee shall authenticate new Notes that reflect the amendment or
waiver.
Failure to make such notation on a Note or to issue a new Note as aforesaid
shall not affect the validity and effect of such amendment or waiver.
SECTION 9.06 TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the Trustee
may, but need not, sign any supplemental indenture that adversely affects its
rights.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are required to
be incorporated into this Indenture (or, prior to the registration of the Notes
pursuant to the Registration Rights Agreement, would be required to be
incorporated into this Indenture if it were qualified under the TIA), and shall,
to the extent applicable, be governed by such provisions. If any provision of
this Indenture limits, qualifies, or conflicts with another provision which is
required (or would be so required) to be incorporated in this Indenture by the
TIA, the incorporated provision shall control.
SECTION 10.02 NOTICES.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in Person or mailed by first class mail
to the other's address stated in Section 10.10 hereof. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first class mail
to his address shown on the register kept by the Registrar. Failure to mail a
notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice as required by the
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.
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<PAGE> 59
SECTION 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officer's Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than pursuant to Section 4.03)
shall include:
(a) a statement that the Person signing such certificate or rendering
such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting of,
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07 LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York, USA or London, United Kingdom are not
required to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If any other
operative date for purposes of this Indenture shall occur on a Legal Holiday
then for all purposes the next succeeding day that is not a Legal Holiday shall
be such operative date.
SECTION 10.08 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect
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<PAGE> 60
of or by reason of such obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Notes.
SECTION 10.09 COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 10.10 VARIABLE PROVISIONS.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ended on December 31, 1999.
The reporting date for Section 7.06 hereof is March 15, of each year. The
first reporting date is March 15, 2000.
The Trustee shall always have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
The Trustee's address is:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Capital Markets Fiduciary Services
SECTION 10.11 GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 10.12 RIGHTS OF THE REGISTRAR AND PAYING AGENT.
In acting as Registrar or Paying Agent hereunder, The Chase Manhattan Bank
(London) and Chase Manhattan Bank Luxembourg S.A. shall have the benefits and
protections afforded to the Trustee hereunder, including those afforded under
Article VII and Sections 10.04 and 10.05 (except to the extent that such
benefits and protections are made expressly inapplicable to the Registrar or the
Paying Agent).
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SECTION 10.13 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.14 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
its successor. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 10.15 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.16 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
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<PAGE> 62
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
NTL COMMUNICATIONS CORP.
By: /s/ Richard J. Lubasch
______________________
Name: Richard J. Lubasch
Title: Executive Vice President,
General Counsel and Secretary
Indenture signature page
<PAGE> 63
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Robert S. Peschler
________________________________
Name: Robert S. Peschler
Title: Assistant Vice President
Indenture signature page
<PAGE> 64
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") [,/OR] EUROCLEAR SYSTEM
("EUROCLEAR"), OR CEDELBANK, S.A. ("CEDELBANK")1 TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR [OR CEDELBANK]
(AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR [OR
CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CHASE
NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC [,/OR] EUROCLEAR [OR CEDELBANK] OR TO CUSTODIANS
THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [,/OR] EUROCLEAR [OR
CEDELBANK] OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR
NOMINEES THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Rule 144A Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
[Regulation S Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
_______________
1 Reference to Cedelbank should only be included in the Regulation S Global
Note.
A-1
<PAGE> 65
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.
A-2
<PAGE> 66
No. ________
euro________
CINS No.[ ] /ISIN No. [ ] /CUSIP No. [__]
9 1/4% SENIOR NOTE DUE 2006
NTL Communications Corp., a Delaware corporation (the "COMPANY"), promises
to pay to __________________________ or registered assigns, the principal sum of
____________________ euro[____________] [,or such other amount as is indicated
on Schedule A hereof*,] on November 15, 2006, subject to the further provisions
of this Note set forth on the reverse hereof which further provisions shall for
all purposes have the same effect as if set forth at this place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2000
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated:__________________________
NTL COMMUNICATIONS CORP.
by:_____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 9 1/4% Senior Notes due 2006 described in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:______________________________________
Authorized Officer
_________________________________________
* Applicable to Global Notes Only
A-3
<PAGE> 67
[FORM OF REVERSE OF INITIAL NOTE]
NTL COMMUNICATIONS CORP.
9 1/4% Senior Note due 2006
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 9 1/4% Senior Notes due November 15, 2006 (the
"NOTES"). The Company promises to pay interest on the Notes in cash semiannually
on each May 15 and November 15, commencing on May 15, 2000, to Holders of record
on the immediately preceding May 1 and November 1, respectively, at the rate of
9 1/4% per annum. Interest on the Notes will accrue from the most recent date to
which interest has been paid on the Notes, or if no interest has been paid, from
November 24, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, at the interest rate borne by the Notes, compounded
semiannually, and it shall pay interest on overdue installments of interest
(without regard to any applicable grace period) at the same interest rate
compounded semiannually. Any interest paid on this Note shall be increased to
the extent necessary to pay Additional Amounts as set forth in this Note.
2. Special Interest. The Holder of this Note is entitled to the benefits of
the Registration Rights Agreement relating to the Notes (the "REGISTRATION
RIGHTS AGREEMENT").
In the event that either (a) we fail to file the Exchange Registration
Statement or the Shelf Registration Statement (as such terms are defined in the
Registration Rights Agreement) on or before the date specified for such filing
in the Registration Rights Agreement, (b) the Exchange Registration Statement is
not declared effective within 270 days after the closing of the sale of the
Notes or the Shelf Registration Statement is not declared effective within 270
days from the date such Shelf Registration Statement is filed, (c) we fail to
complete the Exchange Offer within the specified time frame, or (d) the Exchange
Registration Statement or the Shelf Registration Statement is filed and declared
effective but is thereafter either withdrawn or becomes subject to an effective
stop order suspending the effectiveness (except as specifically permitted in the
Registration Rights Agreement) without being succeeded immediately by an
additional registration statement which becomes effective, then we will pay
special interest pursuant to provisions of the Registration Rights Agreement and
the Notes to each holder of the Notes. Special interest will accrue from (i) the
date specified for such filing, in the case of clause (a) above, (ii) the date
specified for effectiveness in the case of clause (b) above, (iii) the date
specified for completion of the Exchange Offer, in the case of clause (c) above,
or (iv) the date such Exchange Offer Registration Statement or Shelf
Registration Statement ceases to be effective, in the case of clause (d) above
(each such period referred to in clauses (i) through (iv) above an "Accrual
Period"), at a rate per annum equal to 0.25% for the first 90 days of the
Accrual Period; 0.50% for the second 90 days of the Accrual Period; 0.75% for
the third 90 days of the Accrual Period and 1.0% for the remaining portion of
the Accrual Period of the principal amount of the Notes, determined daily. In
each case such additional interest will be payable in cash semiannually in
arrears on each November 15 and May 15, commencing May 15, 2000, to Holders of
record on the immediately preceding May 1 and November 1, respectively.
3. Additional Amounts. This Section 3 shall apply only in the event that
the Company becomes, or a successor to the Company is, a corporation organized
or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law. If any deduction or
withholding for or on account of any present or future taxes, assessments or
other governmental charges of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands (or any political
subdivision or taxing authority thereof or therein) shall at any
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time be required in respect of any amounts to be paid by the Company under this
Note, the Company shall pay or cause to be paid such additional amounts
("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts
received by a Holder of this Note after such deduction or withholding shall be
not less than the amounts specified in this Note to which the Holder of this
Note is entitled; provided, however, that the Company shall not be required to
make any payment of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have been
imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such Holder, if such
Holder is an estate, nominee, trust, partnership or corporation), other
than the holding of this Note or the receipt of amounts payable in respect
of this Note, and the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands (or any political subdivision or
taxing authority thereof or therein) including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein or having or
having had a permanent establishment therein or (ii) the presentation of
this Note (where presentation is required) for payment on a date more than
30 days after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for, whichever occurs later,
except to the extent that the Holder would have been entitled to Additional
Amounts had this Note been presented on the last day of such period of 30
days;
(b) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure to comply by the Holder of this Note
or, if different, the beneficial owner of the interest payable on this
Note, with a timely request of the Company addressed to such Holder or
beneficial owner to provide information, documents or other evidence
concerning the nationality, residence, identity or connection with the
taxing jurisdiction of such Holder or beneficial owner which is required or
imposed by a statute, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such tax,
assessment or governmental charge;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which is
collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or exchange of
a Note;
(e) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal amount,
redemption amount, Change of Control Payment or interest with respect to a
Note, if such payment can be made, and is in fact made, without such
withholding by any other Paying Agent located inside the United States;
(f) any tax, assessment or other governmental charge imposed on a
Holder that is not the beneficial owner of a Note to the extent that the
beneficial owner would not have been entitled to the payment of any such
Additional Amounts had the beneficial owner directly held the Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f) above;
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nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 3.
4. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date for the next interest payment date even
though Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments. The Company will pay principal, premium, if any,
and interest in money of the European Monetary Union that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal, premium, if any, and interest by check payable in such money.
It may mail an interest check to a holder's registered address. If a Holder so
requests, principal, premium, if any, and interest may be paid by wire transfer
of immediately available funds to an account previously specified in writing by
such Holder to the Company and the Trustee.
5. Paying Agent and Registrar. The Chase Manhattan Bank (London) will act
as Paying Agent and Registrar in London. The Trustee will act as Paying Agent
and Registrar in the City of New York, New York. Chase Manhattan Bank Luxembourg
S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the
Notes are listed on the Luxembourg Stock Exchange. The Company may change any
Paying Agent or Registrar without prior notice. The Company or any of its
Affiliates may act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated as of
November 24, 1999 (the "INDENTURE"), between the Company and The Chase Manhattan
Bank, as Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes
are subject to, and qualified by, all such terms, certain of which are
summarized hereon, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes initially issued by the Company on the date
of the Indenture are unsecured general obligations of the Company limited to
euro250,000,000 in aggregate principal amount. Additional Notes may be issued in
accordance with the terms of the Indenture.
7. Optional Redemption. Except as provided in Section 8 hereof, the Notes
are not redeemable at the Company's option.
8. Optional Tax Redemption. (a) The Notes may be redeemed at the option of
the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption if
after the date on which Section 3 of this Note becomes applicable (the "RELEVANT
DATE") there has occurred any change in or amendment to the laws (or any
regulations or official rulings promulgated thereunder) of the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any
political subdivision or taxing authority thereof or therein), or any change in
or amendment to the official application or interpretation of such laws,
regulation or rulings (a "CHANGE IN TAX LAW") which becomes effective after the
Relevant Date, as a result of which the Company is or would be so required on
the next succeeding Interest Payment Date to pay Additional Amounts with respect
to the Notes as described under Section 3 hereof with respect to withholding
taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands (or any political subdivision or taxing authority
thereof or therein) (a "WITHHOLDING TAX") and such Withholding
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Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax
was imposed on the Relevant Date, provided, however, that (i) this paragraph
shall not apply to the extent that, at the Relevant Date it was known or would
have been known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law
in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands was to occur after the Relevant Date, (ii) no such notice of
redemption may be given earlier than 90 days prior to the earliest date on which
the Company would be obliged to pay such Additional Amounts were a payment in
respect of the Notes then due, (iii) at the time such notice of redemption is
given, such obligation to pay such Additional Amount remains in effect and (iv)
the payment of such Additional Amounts cannot be avoided by the use of any
reasonable measures available to the Company.
The Notes may also be redeemed, in whole but not in part, at any time at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest to the date fixed for redemption if the Person formed after the
Relevant Date by a consolidation, amalgamation, reorganization or reconstruction
(or other similar arrangement) of the Company or the Person into which the
Company is merged after the Relevant Date or to which the Company conveys,
transfers or leases its properties and assets after the Relevant Date
substantially as an entirety (collectively, a "SUBSEQUENT CONSOLIDATION") is
required, as a consequence of such Subsequent Consolidation and as a consequence
of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands occurring after the date of such
Subsequent Consolidation to pay Additional Amounts with respect to Notes with
respect to Withholding Tax as described under Section 3 hereof and such
Withholding Tax is imposed at a rate that exceeds the rate (if any) at which
Withholding Tax was or would have been imposed on the date of such Subsequent
Consolidation, provided, however, that this paragraph shall not apply to the
extent that, at the date of such Subsequent Consolidation it was known or would
have been known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law
in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands was to occur after such date.
The Company will also pay, or make available for payment, to Holders on the
Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 3 hereof) resulting from the payment of such
Redemption Price.
9. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of the
Notes to be redeemed at his address of record. On and after the redemption date,
interest ceases to accrue on the Notes or portions of them called for
redemption.
If this Note is redeemed subsequent to a record date with respect to any
interest payment date specified above and on or prior to such interest payment
date, then any accrued interest will be paid to the Person in whose name this
Note is registered at the close of business on such record date.
10. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
11. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date, Holders of Notes that are subject to an offer to purchase will
receive a Change of Control
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offer from the Company prior to any related Purchase Date and may elect to have
such Notes or portions thereof in authorized denominations purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, and when the aggregate amount of Excess Proceeds from such Asset
Sales exceeds $15.0 million, the Company shall be required to make an offer
(an "ASSET SALE OFFER") to all holders of the Notes and Other Qualified
Notes to purchase the maximum principal amount of Notes and Other Qualified
Notes (determined on a pro rata basis according to the principal amount or
accreted value, as the case may be, of the Notes and the Other Qualified
Notes) that may be purchased out of the Excess Proceeds, with respect to
the Notes, at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if
any, to the date fixed for the closing of such offer. To the extent that
the aggregate principal amount or accreted value, as the case may be, of
Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes surrendered
by holders thereof exceeds the amount of Excess Proceeds, then such
remaining Excess Proceeds will be allocated pro rata according to principal
amount or accreted value, as the case may be, to the Notes and each issue
of the Other Qualified Notes and, the Trustee will select the Notes to be
purchased in accordance with Section 3.09(e) of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset at zero.
12. Denominations, Transfer, Exchange. The Notes are in registered form,
without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note selected for redemption.
Also, it need not exchange or register the transfer of any Note for a period of
15 days before a selection of Notes to be redeemed.
13. Persons Deemed Owners. Except as provided in paragraph 4 of this Note,
the registered Holder of a Note may be treated as its owner for all purposes.
14. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
15. Defaults and Remedies. The Notes shall have the Events of Default set
forth in Section 6.01 of the Indenture. Subject to certain limitations in the
Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all unpaid principal and interest accrued on the Notes shall become
due and payable immediately without further action or notice. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not enforce
the Indenture or the Notes except as provided
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in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes issued under the Indenture may
direct the Trustee in its exercise of any trust or power. The Company must
furnish annually compliance certificates to the Trustee. The above description
of Events of Default and remedies is qualified by reference, and subject in its
entirety, to the more complete description thereof contained in the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes), and any existing default may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder, the Indenture or the Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to Holders, to make any change that does
not adversely affect the rights of any Holder or to qualify the Indenture under
the TIA or to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
17. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, engage in
certain transactions with Affiliates, incur additional indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
18. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
19. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Notes.
20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
21. Authentication. The Notes shall not be valid until authenticated by the
manual signature of an authorized officer of the Trustee or an authenticating
agent.
22. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder of the Notes upon written request
and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
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Attention of: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
____________________________________________
(Insert assignee's social security or tax I.D. no.)
___________________________________________________
___________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Your Signature:__________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: * ____________________________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the later
of the date of original issuance of such Notes and the last date, if any,
on which such Notes were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Notes are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company or a subsidiary thereof,
(2) [ ] to a qualified institutional buyer in compliance with Rule 144A,
(3) [ ] outside the United States in compliance with Rule 903 or Rule 904
under the Securities Act,
(4) [ ] pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available) or
(5) [ ]inside the United States to an Institutional Accredited Investor
that, prior to such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Notes (the form of which letter can be
obtained from the Trustee) and, if such transfer is in respect of an
aggregate principal amount of Notes of less than euro100,000, an opinion of
counsel acceptable to the Company that such transfer is in compliance with
the Securities Act,
(6) [ ] pursuant to an effective registration statement under the
Securities Act.
___________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
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__________________________
Signature
Signature Guarantee*
___________________________
Signature must be guaranteed
_________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________
___________________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
NOTICE: To be executed by an executive officer
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased by
the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the
box: [ ]
If the purchase is in part, indicate the portion (in denominations of
euro1,000 or any integral multiple thereof) to be purchased:
______________________
Your Signature:____________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:**/
_____________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
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[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be euro_______. The
following increases or decreases in the principal amount of this Global Note
have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal amount Signature of Date of exchange
decrease in increase in of this Global Note authorized officer following such
principal amount principal amount of Trustee or decrease or
of this Global Note of this Global Note Common increase
Depositary
<S> <C> <C> <C> <C>
</TABLE>
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EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE]
[Global Notes Legend, if applicable]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") [,/OR] EUROCLEAR SYSTEM
("EUROCLEAR"), OR CEDELBANK S.A. ("CEDELBANK")2, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR] EUROCLEAR [OR
CEDELBANK](AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR] EUROCLEAR [OR
CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CHASE
NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC [OR] EUROCLEAR [OR CEDELBANK] OR TO CUSTODIANS
THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [OR] EUROCLEAR [OR CEDELBANK]
OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR NOMINEE
THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
_______________
2 Reference to Cedelbank should only be included in the Regulation S Global
Note.
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No. ___________ euro__________
CINS No. [ ]/ISIN No. [ ]/ CUSIP No. [ ]
9 1/4% SERIES B SENIOR NOTE DUE 2006
NTL Communications Corp., a Delaware corporation (the "COMPANY") promises
to pay to _________________________ or registered assigns, the principal sum of
euro[ ] [or such other amount as is indicated on Schedule A hereof]**** on
November 15, 2006, subject to the further provisions of this Note set forth on
the reverse hereof which further provisions shall for all purposes have the same
effect as if set forth at this place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2000
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: ________________
NTL COMMUNICATIONS CORP.
by:________________________________
by:________________________________
_______________
**** Applicable to Global Notes only.
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 9 1/4% Series B Senior Notes due 2006 described in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By: _____________________________________
Authorized Officer
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(FORM OF REVERSE OF EXCHANGE NOTE)
NTL COMMUNICATIONS CORP.
9 1/4% Series B Senior Note due 2006
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 9 1/4% Series B Senior Notes due 2006 (the
"NOTES"). The Company promises to pay interest on the Notes in cash semiannually
on each May 15 and November 15, commencing on May 15, 2000, to Holders of record
on the immediately preceding May 1 and November 1, respectively, at the rate of
9 1/4% per annum. Interest on the Notes will accrue from the most recent date to
which interest has been paid on the Notes, or if no interest has been paid, from
November 24, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, at the interest rate borne by the Notes, compounded
semiannually, and it shall pay interest on overdue installments of interest
(without regard to any applicable grace period) at the same interest rate
compounded semiannually. Any interest paid on this Note shall be increased to
the extent necessary to pay Additional Amounts as set forth in this Note.
2. Additional Amounts. This Section 2 shall apply only in the event that
the Company becomes, or a successor to the Company is, a corporation organized
or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction of such taxes, duties, assessments or
governmental charges is then required by law. If any deduction or withholding
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing
authority thereof or taxing authority thereof or therein) shall at any time be
required in respect of any amounts to be paid by the Company under this Note,
the Company shall pay or cause to be paid such additional amounts ("ADDITIONAL
AMOUNTS") as may be necessary in order that the net amounts received by a Holder
of this Note after such deduction or withholding shall be not less than the
amounts specified in this Note to which the Holder of this Note is entitled;
provided, however, that the Company shall not be required to make any payment of
Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have been
imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such Holder, if such
Holder is an estate, nominee, trust, partnership or corporation), other
than the holding of this Note or the receipt of amounts payable in respect
of this Note, the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands or any political subdivision or
taxing authority thereof or therein, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein or having or
having had a permanent establishment therein or (ii) the presentation of
this Note (where presentation is required) for payment on a date more than
30 days after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for, whichever occurs later,
except to the extent that the Holder would have been entitled to Additional
Amounts had this Note been presented on the last day of such period of 30
days;
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(b) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure to comply by the Holder of this Note
or, if different, the beneficial owner of the interest payable on this
Note, with a timely request of the Company addressed to such Holder or
beneficial owner to provide information, documents or other evidence
concerning the nationality, residence, identity or connection with the
taxing jurisdiction of such Holder or beneficial owner which is required or
imposed by a statute, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such tax,
assessment or governmental charge;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which is
collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or exchange of
a Note;
(e) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal amount,
redemption amount, Change of Control Payment or interest with respect to a
Note, if such payment can be made, and is in fact made, without such
withholding by any other Paying Agent located inside the United States;
(f) any tax, assessment or other governmental charge imposed on a
Holder that is not the beneficial owner of a Note to the extent that the
beneficial owner would not have been entitled to the payment of any such
Additional Amounts had the beneficial owner directly held the Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 2.
3. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date for the next interest payment date even
though Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments. The Company will pay principal, premium, if any,
and interest in money of the European Monetary Union that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal, premium, if any, and interest by check payable in such money.
It may mail an interest check to a holder's registered address. If a Holder so
requests, principal, premium, if any, and interest may be paid by wire transfer
of immediately available funds to an account previously specified in writing by
such Holder to the Company and the Trustee.
4. Paying Agent and Registrar. The Chase Manhattan Bank (London) will act
as Paying Agent and Registrar in London. The Trustee will act as Paying Agent
and Registrar in the City of New York. Chase Manhattan Bank Luxembourg S.A. will
act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are
listed on the Luxembourg Stock Exchange. The Company may change any Paying
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Agent or Registrar without prior notice. The Company or any of its Affiliates
may act in any such capacity.
5. Indenture. The Company issued the Notes under an indenture, dated as of
November 24, 1999 (the "INDENTURE"), between the Company and The Chase Manhattan
Bank, as Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The
Notes are subject to, and qualified by, all such terms, certain of which are
summarized hereon, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes initially issued by the Company on the date
of the Indenture are unsecured general obligations of the Company limited to
euro250,000,000 in aggregate principal amount. Additional Notes may be issued in
accordance with the terms of the Indenture.
6. Optional Redemption. Except as provided in Section 7 herein, the Notes
are not redeemable at the Company's option.
7. Optional Tax Redemption. (a) The Notes may be redeemed at the option of
the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption if
after the date on which Section 2 of this Note becomes applicable (the "RELEVANT
DATE") there has occurred any change in or amendment to the laws (or any
regulations or official rulings promulgated thereunder) of the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any
political subdivision or taxing authority thereof or therein), or any change in
or amendment to the official application or interpretation of such laws,
regulations or rulings (a "CHANGE IN TAX LAW") which becomes effective after the
Relevant Date, as a result of which the Company is or would be so required on
the next succeeding Interest Payment Date to pay Additional Amounts with respect
to the Notes as described under Section 2 hereof with respect to withholding
taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands (or any political subdivision or taxing authority
thereof or therein) (a "WITHHOLDING TAX") and such Withholding Tax is imposed at
a rate that exceeds the rate (if any) at which Withholding Tax was imposed on
the Relevant Date, provided, however, that (i) this paragraph shall not apply to
the extent that, at the Relevant Date it was known or would have been known had
professional advice of a nationally recognized accounting firm in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands, as the case may be, been sought, that a change in Tax Law in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands was to occur after the Relevant Date, (ii) no such notice of redemption
may be given earlier than 90 days prior to the earliest date on which the
Company would be obliged to pay such Additional Amounts were a payment in
respect of the Notes then due, (iii) at the time such notice of redemption is
given, such obligation to pay such Additional Amount remains in effect and (iv)
the payment of such Additional Amounts cannot be avoided by the use of any
reasonable measures available to the Company.
(b) The Notes may also be redeemed, in whole but not in part, at any
time at a redemption price equal to the principal amount thereof plus
accrued and unpaid interest to the date fixed for redemption if the Person
formed after the Relevant Date by a consolidation, amalgamation,
reorganization or reconstruction (or other similar arrangement) of the
Company or the Person into which the Company is merged after the Relevant
Date or to which the Company conveys, transfers or leases its properties
and assets after the Relevant Date substantially as an entirety
(collectively, a "SUBSEQUENT CONSOLIDATION") is required, as a consequence
of such Subsequent Consolidation and as a consequence of a Change in Tax
Law in the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands occurring after the date of such Subsequent
Consolidation to pay Additional Amounts with respect to Notes with
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respect to Withholding Tax as described under Section 2 hereof and such
Withholding Tax is imposed at a rate that exceeds the rate (if any) at
which Withholding Tax was or would have been imposed on the date of such
Subsequent Consolidation, provided, however, that this paragraph shall not
apply to the extent that, at the date of such Subsequent Consolidation it
was known or would have been known had professional advice of a nationally
recognized accounting firm in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be,
been sought, that a Change in Tax Law in the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to
occur after such date.
The Company will also pay, or make available for payment, to Holders on the
Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 2 hereof) resulting from the payment of such
Redemption Price.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of the
Notes to be redeemed at his address of record. On and after the redemption date,
interest ceases to accrue on the Notes or portions of them called for
redemption. If this Note is redeemed subsequent to a record date with respect to
any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Note is registered at the close of business on such record date.
9. Mandatory Redemption. The Company will not be required to make mandatory
redemption or repurchase payments with respect to the Notes. There are no
sinking fund payments with respect to the Notes.
10. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date. Holders of Notes that are subject to an offer to purchase will
receive a Change of Control offer from the Company prior to any related Purchase
Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, and when the aggregate amount of Excess Proceeds from such Asset
Sales exceeds $15.0 million, the Company shall be required to make an offer
(an "ASSET SALE OFFER") to all holders of the Notes and Other Qualified
Notes to purchase the maximum principal amount of Notes and other Qualified
Notes (determined on a pro rata basis according to the principal amount or
accreted value, as the case may be, of the Notes and the Other Qualified
Notes) that may be purchased out of the Excess Proceeds with respect to the
Notes, at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if
any, to the date fixed for the closing of such offer. To the extent that
the aggregate principal amount or accreted value, as the case may be, of
Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes surrendered
by holders thereof exceeds the amount of Excess Proceeds then any remaining
Excess Proceeds will be allocated pro rata according to principal amount or
accreted value, as the case may be, to the Notes and each issue of the
Other Qualified Notes and, the Trustee will select the Notes to be
purchased in accordance with Section 3.09(e) of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset at zero.
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11. Denominations, Transfer, Exchange. The Notes are in registered form,
without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note selected for redemption.
Also, it need not exchange or register the transfer of any Note for a period of
15 days before a selection of Notes to be redeemed.
12. Persons Deemed Owners. Except as provided in paragraph 3 of this Note,
the registered Holder of a Note may be treated as its owner for all purposes.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
14. Defaults and Remedies. The Notes shall have the Events of Default as
set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all unpaid principal and interest accrued on the Notes shall become
due and payable immediately without further action or notice. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not enforce
the Indenture or the Notes as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes issued under the Indenture may direct the Trustee in its exercise of any
trust or power. The Company must furnish annually compliance certificates to the
Trustee. The above description of Events of Default and remedies is qualified by
reference, and subject in its entirety, to the more complete description thereof
contained in the Indenture.
15. Amendments, Supplements and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes), and any existing default may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder, the Indenture or the Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to Holders, to make any change that does
not adversely affect the rights of any Holder or to qualify the Indenture under
the TIA or to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
16. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, engage in
certain transactions with Affiliates, incur additional Indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
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<PAGE> 86
17. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
18. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
20. Authentication. The Notes shall not be valid until authenticated by the
manual signature of an authorized officer of the Trustee or an authenticating
agent.
21. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder of the Notes upon written request
and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
____________________________________________
____________________________________________
(Insert assignee's social security or tax I.D. no.)
___________________________________________________
___________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Your Signature:______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: **/ ______________________________
________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
of the New York Stock Exchange.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased by
the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the
box:[ ]
If the purchase is in part, indicate the portion (in denominations of
euro1,000 or any integral multiple thereof) to be purchased:___________________
Your Signature:_______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:***
_________________
*** Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
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SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be
euro__________________. The following increases or decreases in the principal
amount of this Global Note have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal amount Signature of Date of exchange
decrease in increase in of this Global Note authorized officer following such
principal amount principal amount of Trustee or decrease or
of this Global Note of this Global Note Common increase
Depositary
<S> <C> <C> <C> <C>
</TABLE>
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EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM RULE 144A GLOBAL NOTE
TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(ii)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Incorporated 9 1/4% Senior Notes Due 2006 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24, 1999
(the "Indenture"), between NTL Communications Corp., as Issuer, and The Chase
Manhattan Bank, as Trustee.
This letter relates to euro[ ] aggregate principal amount of Notes which
are held in the form of the [Rule 144A Global Note (CUSIP No. )] with the
Depositary in the name of [name of transferor] (the "Transferor") to effect the
transfer of the Notes in exchange for an equivalent beneficial interest in the
Regulation S Global Note.
In connection with such request, the Transferor does hereby certify that
such transfer has been effected in accordance with the transfer restrictions set
forth in the Notes and (i) with respect to transfers made in reliance on
Regulation S, does hereby certify that:
(1) the offer of the Notes was not made to a Person in the United
States;
(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
Person acting on its behalf knows that the transaction was pre-arranged
with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the United States Securities Act of 1933, as
amended (the "Securities Act");
and (ii) with respect to transfers made in reliance on Rule 144 does hereby
certify that the Notes are being transferred in a transaction permitted by Rule
144 under the Securities Act; and (iii) with respect to transfers made in
reliance on Rule 144A, does hereby certify that such Notes are being transferred
in accordance with Rule 144A under the Securities Act to a transferee that the
Transferor reasonably believes is purchasing the Notes for its own account or an
account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
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<PAGE> 91
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the
case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Capitalized terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S.
[Name of Transferor]
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President,
General Counsel and Secretary
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<PAGE> 92
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE
TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(iii), (iv) or (v)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Market Fiduciary Services
Re: NTL Communications Corp. 9 1/4% Senior Notes Due 2006 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24, 1999
(the "Indenture"), between NTL Communications Corp., as Issuer, and The Chase
Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall
have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes which
are held in the form of the [Regulation S Global Note] [DTC Rule 144A Global
Note] [Euroclear Rule 144A Global Note] (CINS No. [ ]) (CUSIP No. [ ])with the
Depositary in the name of [name of transferor] (the "Transferor") to effect the
transfer of the Senior Notes in exchange for an equivalent beneficial interest
in the [DTC] [Euroclear] Rule 144A Global Note.
In connection with such request, and in respect of such Notes the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended, to a
transferee that the Transferor reasonably believes is purchasing the Notes for
its own account or an account with respect to which the transferee exercises
sole investment discretion and the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
[Name of Transferor],
By:__________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President,
General Counsel and Secretary
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<PAGE> 93
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR RESTRICTED
NOTE TO RESTRICTED NOTE
(Transfers pursuant to Section 2.06(a)(vi)
or Section 2.06(a)(vii) of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 9 1/4% Senior Notes due 2006 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24, 1999
(the "Indenture"), between NTL Communications Corp., as Issuer, and The Chase
Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall
have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes which
are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note
(CINS No. [ ]/ISIN No. [ ]/CUSIP No. [ ]) with the Depositary in the name of
[name of transferor] (the "Transferor") to effect the transfer of the Notes.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes and (ii) in
accordance with applicable securities laws of any state of the United States or
any other jurisdiction.
*Insert, if appropriate.
[Name of Transferor],
By:_________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
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<PAGE> 94
EXHIBIT F
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 9 1/4% Senior Notes due 2006 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24, 1999
(the "Indenture"), between NTL Communications Corp., as Issuer, and The Chase
Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall
have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes which
are held [in the form of the [Rule 144A/Regulation S] [Restricted] [Global] Note
(CINS No. [ ] / ISIN No. [ ]/CUSIP No.[ ]) with the Depositary * * in the name
of [name of transferor] (the "Transferor") to effect the transfer of the Notes
to the undersigned.
In connection with such request, and in respect of such Notes we confirm
that:
1. We understand that the Notes were originally offered in a transaction
not involving any public offering in the United States within the meaning of the
United States Securities Act of 1933, as amended (the "SECURITIES ACT"), that
the Notes have not been registered under the Securities Act and that (A) the
Notes may be offered, resold, pledged or otherwise transferred only (i) to a
Person who the seller reasonably believes is a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of Rule 144
under the Securities Act, to a Person who the seller reasonably believes is an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act), outside the United States in a
transaction meeting the requirements of Rule 903 or 904 of Regulation S under
the Securities Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Company so requests), (ii) to the Company, (iii) pursuant to any other available
exemption from registration or (iv) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction and (B)
the purchaser will, and each subsequent Holder is required to, notify any
subsequent purchaser from it of the resale restrictions set forth in (A) above.
2. We are a corporation, partnership or other entity having such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Notes, and we are (or any account
for which we are purchasing under paragraph 4 below is) an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, able to bear the economic risk of our proposed investment in the
Notes.
__________________
* Insert and modify if appropriate
F-1
<PAGE> 95
3. We are acquiring the Notes for our own account (or for accounts as to
which we exercise sole investment discretion and have authority to make, and do
make, the statements contained in this letter) and not with a view to any
distribution of the Notes, subject, nevertheless, to the understanding that the
disposition of our property shall at all times be and remain within our control.
4. We are, and each account (if any) for which we are purchasing Notes is,
purchasing Notes having an aggregate principal amount of not less than
euro100,000 and, if such transfer is in respect of an aggregate principal amount
of Notes of less than euro100,000, we are providing an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act.
5. We understand that (a) the Notes will be delivered to us in registered
form only and that the certificate delivered to us in respect of the Notes will
bear a legend substantially to the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
and (b) such certificates will be reissued without the foregoing legend
only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish to dispose
of any of the Notes, we will not do so unless:
(a) the Notes are sold to the Company or any subsidiary thereof;
(b) the Notes are sold to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act;
(c) the Notes are sold outside the United States in compliance with
Rule 903 or Rule 904 under the Securities Act;
(d) the Notes are sold to an Institutional Accredited Investor in a
transaction exempt from the registration requirements of the Securities
Act,
(d) the Notes are sold pursuant to an effective registration statement
under the Securities Act; or
(e) the Notes are sold pursuant to any other available exemption from
registration, subject to the requirements of the legend set forth above.
Very truly yours,
F-2
<PAGE> 96
[PURCHASER]
By:____________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President,
General Counsel and Secretary
F-3
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
- --------------------------------------------------------------------------------
NTL COMMUNICATIONS CORP.
EURO350,000,000
9 7/8% SENIOR NOTES DUE 2009
------------------------
INDENTURE
Dated as of November 24, 1999
------------------------
------------------------
The Chase Manhattan Bank
Trustee
------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.01 Definitions..................................................................................1
Section 1.02 Other Definitions...........................................................................13
Section 1.03 Incorporation by Reference of Trust Indenture Act...........................................14
Section 1.04 Rules of Construction.......................................................................14
ARTICLE II. THE NOTES............................................................................................15
Section 1.01 Form and Dating.............................................................................15
Section 2.02 Execution and Authentication................................................................17
Section 2.03 Registrar and Paying Agent..................................................................17
Section 2.04 Paying Agent to Hold Money in Trust.........................................................18
Section 2.05 Holder Lists................................................................................18
Section 2.06 Transfer and Exchange.......................................................................18
Section 2.07 Replacement Notes...........................................................................23
Section 2.08 Outstanding Notes...........................................................................23
Section 2.09 Treasury Notes..............................................................................23
Section 2.10 Temporary Notes; Global Notes...............................................................23
Section 2.11 Cancellation................................................................................24
Section 2.12 Defaulted Interest..........................................................................24
ARTICLE III. REDEMPTION..........................................................................................24
Section 3.01 Notices to Trustee..........................................................................24
Section 3.02 Selection of Notes to Be Redeemed...........................................................25
Section 3.03 Notice of Redemption........................................................................25
Section 3.04 Effect of Notice of Redemption..............................................................26
Section 3.05 Deposit of Redemption Price.................................................................26
Section 3.06 Notes Redeemed in Part......................................................................26
Section 3.07 Optional Redemption and Optional Tax Redemption.............................................26
Section 3.08 Mandatory Redemption........................................................................26
Section 3.09 Asset Sale Offer and Purchase Offer.........................................................26
ARTICLE IV. COVENANTS............................................................................................29
Section 4.01 Payment of Notes............................................................................29
Section 4.02 Reports.....................................................................................29
Section 4.03 Compliance Certificate......................................................................29
Section 4.04 Stay, Extension and Usury Laws..............................................................30
Section 4.05 Corporate Existence.........................................................................30
Section 4.06 Taxes.......................................................................................30
Section 4.07 Limitations on Liens........................................................................30
Section 4.08 Incurrence Of Indebtedness And Issuance Of Preferred Stock..................................31
Section 4.09 Restricted Payments.........................................................................33
Section 4.10 Asset Sales.................................................................................35
Section 4.11 Transactions with Affiliates................................................................37
Section 4.12 Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries..................38
Section 4.13 Change of Control...........................................................................39
Section 4.14 Payment of Additional Amounts...............................................................40
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V. SUCCESSORS............................................................................................40
Section 5.01 Merger, Consolidation or Sale of Assets.....................................................40
Section 5.02 Successor Corporation Substituted...........................................................41
ARTICLE VI. DEFAULTS AND REMEDIES................................................................................41
Section 6.01 Events of Default...........................................................................41
Section 6.02 Acceleration................................................................................43
Section 6.03 Other Remedies..............................................................................43
Section 6.04 Waiver of Past Defaults.....................................................................44
Section 6.05 Control by majority.........................................................................44
Section 6.06 Limitation on Suits.........................................................................44
Section 6.07 Rights of Holders to Receive Payment........................................................44
Section 6.08 Collection Suit by Trustee..................................................................44
Section 6.09 Trustee May File Proofs of Claim............................................................45
Section 6.10 Priorities..................................................................................45
Section 6.11 Undertaking for Costs.......................................................................45
ARTICLE VII. TRUSTEE.............................................................................................45
Section 7.01 Duties of Trustee...........................................................................45
Section 7.02 Rights of Trustee...........................................................................46
Section 7.03 Individual Rights of Trustee................................................................46
Section 7.04 Trustee's Disclaimer........................................................................47
Section 7.05 Notice of Defaults..........................................................................47
Section 7.06 Reports by Trustee to Holders...............................................................47
Section 7.07 Compensation and Indemnity..................................................................47
Section 7.08 Replacement of Trustee......................................................................48
Section 7.09 Successor Trustee by Merger, Etc............................................................49
Section 7.10 Eligibility; Disqualification...............................................................49
Section 7.11 Preferential Collection of Claims Against Company...........................................49
ARTICLE VIII. DISCHARGE OF INDENTURE.............................................................................49
Section 8.01 Termination of Company's Obligations........................................................49
Section 8.02 Option to Effect Defeasance.................................................................49
Section 8.03 Application of Trust Money..................................................................51
Section 8.04 Repayment to Company........................................................................51
Section 8.05 Reinstatement...............................................................................51
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................................52
Section 9.01 Without Consent of Holders..................................................................52
Section 9.02 With Consent of Holders.....................................................................52
Section 9.03 Compliance with Trust Indenture Act.........................................................53
Section 9.04 Revocation and Effect of Consents...........................................................53
Section 9.05 Notation on or Exchange of Notes............................................................53
Section 9.06 Trustee Protected...........................................................................54
ARTICLE X. MISCELLANEOUS.........................................................................................54
Section 10.01 Trust Indenture Act Controls................................................................54
Section 10.02 Notices.....................................................................................54
Section 10.03 Communication by Holders with Other Holders.................................................54
Section 10.04 Certificate and Opinion as to Conditions Precedent..........................................54
Section 10.05 Statements Required in Certificate or Opinion...............................................55
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 10.06 Rules by Trustee and Agents..............................................................55
Section 10.07 Legal Holidays...........................................................................55
Section 10.08 No Recourse Against Others...............................................................55
Section 10.09 Counterparts and Facsimile Signatures....................................................55
Section 10.10 Variable Provisions......................................................................55
Section 10.11 Governing Law............................................................................56
Section 10.12 Rights of the Registrar and Paying Agent.................................................56
Section 10.13 No Adverse Interpretation of Other Agreements............................................56
Section 10.14 Successors...............................................................................56
Section 10.15 Severability.............................................................................56
Section 10.16 Table of Contents, Headings, Etc.........................................................57
</TABLE>
iii
<PAGE> 5
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<C> <C>
310(a)(1).................................................................................................7.10
(a)(2) ...................................................................................................7.10
(a)(3)....................................................................................................N.A.
(a)(4)....................................................................................................N.A.
(a)(5)....................................................................................................7.10
(b) .....................................................................................................7.08
7.10
(c) .....................................................................................................N.A.
311(a)....................................................................................................7.11
(b) .....................................................................................................7.11
(c) .....................................................................................................N.A.
312(a)....................................................................................................2.05
(b) .....................................................................................................10.03
(c) .....................................................................................................10.03
313(a)....................................................................................................7.06
(b)(1)....................................................................................................N.A.
(b)(2)....................................................................................................7.06
(c) .....................................................................................................7.06
(d) .....................................................................................................7.06
314(a)....................................................................................................4.02
4.03
(b) .....................................................................................................N.A.
(c)(1)....................................................................................................10.04
(c)(2)....................................................................................................10.04
(c)(3)....................................................................................................N.A.
(d) .....................................................................................................N.A.
(e) .....................................................................................................N.A.
(f) .....................................................................................................N.A.
315(a)....................................................................................................7.01(b)
(b) .....................................................................................................7.05
(c) .....................................................................................................7.01(a)
(d) .....................................................................................................7.01(c)
(e) .....................................................................................................6.11
316(a)(last sentence).....................................................................................2.09
(a)(1)(A).................................................................................................6.05
(a)(1)(B).................................................................................................6.04
(a)(2)....................................................................................................N.A.
(b) .....................................................................................................6.07
(c) .....................................................................................................9.04
317(a)(1).................................................................................................6.08
(a)(2)....................................................................................................6.09
(b) .....................................................................................................2.04
318(a)....................................................................................................N.A.
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
iv
<PAGE> 6
INDENTURE, dated as of November 24, 1999, between NTL Communications
Corp., a Delaware corporation (the "COMPANY"), and The Chase Manhattan Bank, a
New York corporation, as trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined in Section 1.01) of the
Company's 90% Senior Notes due 2009 (the "INITIAL NOTES") and, if and when
issued in exchange for Initial Notes, the Company's 90% Series B Senior
Notes due 2009 (the "EXCHANGE NOTES" and, together with the Initial Notes, the
"NOTES"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"1999 9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon
Notes due 2009 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes
due 2009.
"2006 NOTES" means the Company's 9 1/4% Senior Notes due 2006 and the
Company's 9 1/4% Series B Senior Notes due 2006.
"2009 NOTES" means the Company's 11 1/2% Senior Deferred Coupon Notes
due 2009 and the Company's 11 1/2 % Series B Senior Deferred Coupon Notes due
2009.
"9 1/2% NOTES" means the Company's 9 1/2% Senior Notes due 2008 and the
Company's 9 1/2% Series B Senior Notes due 2008.
"9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon Notes
due 2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due
2008.
"10% NOTES" means the Company's 10% Series B Senior Notes due 2007.
"10 3/4% NOTES" means the Company's 10 3/4% Senior Deferred Coupon
Notes due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes
due 2008.
"11 1/2% DEFERRED COUPON NOTES" means the Company's 11 1/2% Series B
Senior Deferred Coupon Notes due 2006.
"11 1/2% NOTES" means the Company's 11 1/2% Senior Notes due 2008 and
the Company's 11 1/2% Series B Senior Notes due 2008.
"12 3/4% NOTES" means the Company's 12 3/4% Series A Senior Deferred
Coupon Notes due 2005.
"12M % NOTES" means the Company's 12 3/8% Series B Senior Deferred
Coupon Notes due 2008.
"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person (the "Acquired Person") existing at the time
such Acquired Person merged with or into or became a Subsidiary of such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such Acquired Person merging with or into or becoming a
Subsidiary of such specified Person.
"ACQUIRED PERSON" has the meaning specified in the definition of
Acquired Debt.
1
<PAGE> 7
"ADDITIONAL NOTES" means up to euro150,000,000 in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
"ADJUSTED TOTAL ASSETS" means the total amount of assets of the Company
and its Restricted Subsidiaries (including the amount of any Investment in any
Non-Restricted Subsidiary), except to the extent resulting from write-ups of
assets (other than write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities of
the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as calculated in conformity with GAAP. For purposes of this
Adjusted Total Assets definition, (a) assets shall be calculated less applicable
accumulated depreciation, accumulated amortization and other valuation reserves,
and (b) all calculations shall exclude all intercompany items.
"ADJUSTED TOTAL CONTROLLED ASSETS" means the total amount of assets of
the Company and its Cable Controlled Subsidiaries, except to the extent
resulting from write-ups of assets (other than write-ups in connection with
accounting for acquisitions in conformity with GAAP), after deducting therefrom
(i) all current liabilities of the Company and such Cable Controlled
Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles of the Company
and such Restricted Subsidiaries, all as calculated in conformity with GAAP;
provided that Adjusted Total Controlled Assets shall be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal to the
aggregate amount of all Investments of the Company or any such Cable Controlled
Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash
Equivalents. For purposes of this Adjusted Total Controlled Assets definition,
(a) assets shall be calculated less applicable accumulated depreciation,
accumulated amortization and other valuation reserves, and (b) all calculations
shall exclude all intercompany items.
"AFFILIATE" of any specified Person means any other Person directly
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Registrar or Paying Agent.
"ANNUALIZED PRO FORMA EBITDA" means, with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"ASSET SALE" means (i) any sale, lease, transfer, conveyance or other
disposition of any assets (including by way of a sale-and-leaseback) other than
the sale or transfer of inventory or goods held for sale in the ordinary course
of business (provided that the sale, lease, transfer, conveyance or other
disposition of all or substantially all of the assets of the Company shall be
governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease,
transfer, conveyance or other disposition of any Equity Interests of any of the
Company's Restricted Subsidiaries to any Person; in either case other than (A)
to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which
is a Subsidiary of the Company on the Issuance Date provided that at the time of
and after giving effect to such issuance, sale, lease, transfer, conveyance or
other disposition to such Subsidiary, the Company's ownership percentage in such
Subsidiary is equal to or greater than such percentage on the Issuance Date or
(B) the issuance,
2
<PAGE> 8
sale, transfer, conveyance or other disposition of Equity Interests of a
Subsidiary in exchange for capital contributions made on a pro rata basis by the
holders of the Equity Interests of such Subsidiary.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CABLE ASSETS" means tangible or intangible assets, licenses
(including, without limitation, Licenses) and computer software used in
connection with a Cable Business.
"CABLE BUSINESS" means (i) any Person directly or indirectly operating,
or owning a license to operate, a cable and/or television and/or telephone
and/or telecommunications system or service principally within the United
Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business.
"CABLE CONTROLLED PROPERTY" means a Cable Controlled Subsidiary or a
Cable Asset held by a Cable Controlled Subsidiary.
"CABLE CONTROLLED SUBSIDIARY" means any Restricted Subsidiary that is
primarily engaged, directly or indirectly, in one or more Cable Businesses.
"CABLE RELATED BUSINESS" means a Person which directly or indirectly
owns or provides a service or product used in a Cable Business, including,
without limitation, any television programming, production and/or licensing
business or any programming guide or telephone directory business or content or
software related thereto.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"CAPITAL STOCK SALE PROCEEDS" means the aggregate net sale proceeds
(including from the sale of any property received for the Capital Stock or the
fair market value of such property, as determined by an independent appraisal
firm) received by the Company or any Subsidiary of the Company from the issue or
sale (other than to a Subsidiary) by the Company of any class of its Capital
Stock after October 14, 1993 (including Capital Stock of the Company issued
after October 14, 1993 upon conversion of or in exchange for other securities of
the Company).
"CASH EQUIVALENTS" means (i) Permitted Currency, (ii) securities issued
or directly and fully guaranteed or insured by the United States government, a
European Union member government or any agency or instrumentality thereof having
maturities of not more than six months and two days from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States, the United Kingdom, the Republic of Ireland or any other European Union
member having capital and surplus in excess of $500.0 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the
equivalent thereof by S & P and in each case maturing within six months and two
days after the date of acquisition and (vi) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds described in
clauses (i)-(v) of this definition.
3
<PAGE> 9
"CEDEL" means Cedelbank, S.A.
"CHANGE OF CONTROL" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder),
(ii) the approval by the requisite stockholders of the Company of a plan of
liquidation or dissolution of the Company, (iii) any "Person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting for the purpose
of acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of all classes of the voting stock of the
Company and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis, unless, as a result of such transaction, the ultimate
direct or indirect ownership of the Company is substantially the same
immediately after such transaction as it was immediately prior to such
transaction, or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Ratings Decline.
"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article V and thereafter means the successor.
"CONSOLIDATED INTEREST EXPENSE" means, for any Person, for any period,
the amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled to
be paid or accrued by such Person and its Subsidiaries (other than
Non-Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in such
capital lease obligation in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
(other than Non-Restricted Subsidiaries) for such period, on a consolidated
basis, determined in accordance with GAAP; provided that (i) the Net Income of
any Person that is not a Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent Person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends or
distributions
4
<PAGE> 10
paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded and (iv) the cumulative
effect of a change in accounting principles shall be excluded.
"CONVERTIBLE SUBORDINATED NOTES" means the Company's 7% Convertible
Subordinated Notes due 2008 issued pursuant to an indenture dated as of December
16, 1998 between the Company and The Chase Manhattan Bank, as trustee.
"CREDIT FACILITY" means the Facilities Agreement, dated October 17,
1997, between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc,
as arranger, Chase Manhattan International Limited, as agent and security
trustee and The Chase Manhattan Bank as issuer, as such Facilities Agreement may
be supplemented, amended, restated, modified, renewed, refunded, replaced or
refinanced, in whole or in part, from time to time in an aggregate outstanding
principal amount not to exceed the greater of (i) (pound)555.0 million and (ii)
the amount of the aggregate commitments thereunder as the same may be increased
after March 13, 1998 as contemplated by the Facilities Agreement as amended or
supplemented to March 13, 1998, but in no event greater than (pound)875.0
million, less in each case, the aggregate amount of all Net Proceeds of Asset
Sales that have been applied to permanently reduce Indebtedness under the Credit
Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be
incurred under this Indenture may, but need not, be incurred under the Credit
Facility without regard to the limit set forth in the preceding sentence.
Indebtedness outstanding under the Credit Facility on the date hereof shall be
deemed to have been incurred on such date in reliance on the exception provided
by Section 4.08(b)(i).
"CUMULATIVE EBITDA" means the cumulative EBITDA of the Company from and
after the Issuance Date to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries
shall not be included.
"CUMULATIVE INTEREST EXPENSE" means the aggregate amount of
Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued
by the Company from the Issuance Date to the end of the fiscal quarter
immediately preceding a proposed Restricted Payment, determined on a
consolidated basis in accordance with GAAP.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" shall mean DTC (in the case of the DTC Rule 144A Global
Notes), Euroclear (in the case of Regulation S Global Notes or Euroclear Rule
144A Global Notes or Cedel (in the case of Regulation S Global Notes), as
applicable.
"DIAMOND NOTES" shall mean the 10% Diamond Senior Notes due 2008, the
91/8% Diamond Senior Notes due 2008, the 10 3/4% Diamond Senior Discount Notes
due 2007, the 11 3/4% Diamond Senior Discount Notes due 2005 and the 13 1/4%
Diamond Senior Discount Notes due 2004.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"DTC" means The Depository Trust Company.
5
<PAGE> 11
"EBITDA" means, for any Person, for any period, an amount equal to (A)
the sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash item reducing
Consolidated Net Income for such period (excluding any such non-cash item to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period), minus (B) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined in accordance
with GAAP consistently applied.
"EEA GOVERNMENT OBLIGATION" means direct non-callable obligations of,
or non-callable obligations guaranteed by, any European Union members for the
payment of which obligation or guarantee the full faith and credit of the
respective nation is pledged; provided that such nation has a credit rating at
least equal to that of the highest rated member nation of the European Economic
Area.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office as operator of the Euroclear system.
"EUROPEAN ECONOMIC AREA" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area,
dated May 2, 1992, as amended.
"EUROPEAN UNION MEMBER" means any country that is or becomes a member
of the European Union or any successor organization thereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance and
other agreements or arrangements, or combination thereof, the principal purpose
of which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the Issuance Date, until such amounts are repaid,
including, without limitation, the Existing Notes.
"EXISTING NOTES" means the Old Notes and the Convertible Subordinated
Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date and are applied on a consistent basis.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without
6
<PAGE> 12
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the
register referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to capital leases and sale-and-leaseback transactions) or representing
any hedging obligations under an Exchange Rate Contract or an Interest Rate
Agreement, except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other than
obligations under an Exchange Rate Contract or an Interest Rate Agreement) would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and also includes, to the extent not otherwise included, the
Guarantee of items which would be included within this definition. The amount of
any Indebtedness outstanding as of any date shall be the accreted value thereof,
in the case of any Indebtedness issued with original issue discount.
"INDENTURE" means this Indenture, as amended from time to time.
"INITIAL PURCHASERS" means Morgan Stanley & Co. International Limited,
Goldman Sachs International, Chase Securities Inc., Donaldson, Lufkin & Jenrette
International, and Salomon Brothers International Limited.
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
similar agreement, the principal purpose of which is to protect the party
indicated therein against fluctuations in interest rates.
"INVESTMENT GRADE" means BBB or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such ratings by S&P or Moody's. In the event that
the Company shall be permitted to select any other Rating Agency, the equivalent
of such ratings by such Rating Agency shall be used.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding commission,
travel and similar advances and loans, joint property ownership and other
arrangements, in each case, made to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"ISSUANCE DATE" means the date on which the Notes are first
authenticated and issued.
"LICENSE" means any license issued or awarded pursuant to the
Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the
Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in each case,
as such Acts may, from time to time, be amended, modified or re-enacted) (or
equivalent statutes of any jurisdiction) to operate or own a Cable Business.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the
7
<PAGE> 13
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent or successor statutes) of any
jurisdiction).
"MATERIAL LICENSE" means a License held by the Company or any of its
Subsidiaries which License at the time of determination covers a number of Net
Households which equals or exceeds 5% of the aggregate number of Net Households
covered by all of the Licenses held by the Company and its Subsidiaries at such
time.
"MATERIAL SUBSIDIARY" means (i) NTL UK Group, Inc. (formerly known as
OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel
Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and
CableTel Kirklees and (ii) any other Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).
"MONETIZE" means a strategy with respect to Equity Interests that
generates an amount of cash equal to the fair value of such Equity Interests.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET HOUSEHOLDS" means the product of (i) the number of households
covered by a License in the United Kingdom and (ii) the percentage of the entity
holding such License which is owned directly or indirectly by the Company.
"NET INCOME" means, with respect to any Person for a specific period,
the net income (loss) of such Person during such period, determined in
accordance with GAAP, excluding, however, any gain (but not loss) during such
period, together with any related provision for taxes on such gain (but not
loss), realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period, together
with any related provision for taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"NON-CONTROLLED SUBSIDIARY" means an entity which is not a Cable
Controlled Subsidiary.
"NON-RECOURSE DEBT" means Indebtedness or that portion of Indebtedness
as to which none of the Company, nor any Restricted Subsidiary: (i) provides
credit support (including any undertaking, agreement or instrument which would
constitute Indebtedness); (ii) is directly or indirectly liable; or (iii)
constitutes the lender.
"NON-RESTRICTED SUBSIDIARY" means (A) a Subsidiary that (a) at the time
of its designation by the Board of Directors as a Non-Restricted Subsidiary has
not acquired any assets (other than as specifically permitted by clause (e) of
"Permitted Investments" or Section 4.09 hereof), at any previous time, directly
or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no
Indebtedness other than Non-Recourse Debt and (c) that at the time of such
designation, after giving pro forma effect to such
8
<PAGE> 14
designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company is equal to or less than the ratio of Indebtedness to Annualized Pro
Forma EBITDA of the Company immediately preceding such designation, provided,
however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company immediately preceding such designation is 6:1 or less, then the ratio of
Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater
than such ratio immediately preceding such designation; (B) any Subsidiary which
(a) has been acquired or capitalized out of or by Equity Interests (other than
Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b)
has no Indebtedness other than Non-Recourse Debt and (c) is designated as a
Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or
consolidated with or into, or its assets or capital stock is to be transferred
to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted
Subsidiary.
"NOTES" has the meaning set forth in the preamble hereto. The Original
Notes and the Additional Notes shall be treated as a single class for all
purposes under this Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER'S CERTIFICATE" means a certificate signed by an Officer of the
Company. See Sections 10.04 and 10.05 hereof.
"OLD NOTES" means the 123/8% Notes, the 11 1/2% Notes, the 12 3/4%
Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the
9 3/4% Notes, the 1999 9 3/4% Notes and the 9 1/2% Notes.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 10.04 and 10.05 hereof.
"ORIGINAL NOTES" means the first euro350,000,000 in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"OTHER QUALIFIED NOTES" means any outstanding senior indebtedness of
the Company issued pursuant to an indenture having a provision substantially
similar to Section 4.10 hereof (including, without limitation, the 2006 Notes,
the 2009 Notes, the 12 3/8% Notes, the 11 1/2% Notes, the 12 3/4% Notes, the
11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4%
Notes, the 1999 9 3/4% Notes, the 9 1/2% Notes and the Diamond Notes).
"PARTICIPANT" means with respect to the Depositary, a person who has an
account with the Depositary.
"PERMITTED ACQUIRED DEBT" means, with respect to any Acquired Person
(including, for this purpose, any Non-Restricted Subsidiary at the time such
Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of
such Acquired Person and its Subsidiaries in an amount (determined on a
consolidated basis) not exceeding the sum of (x) amount of the gross book value
of property, plant and equipment of the Acquired Person and its Subsidiaries as
set forth on the most recent consolidated balance sheet of the Acquired Person
(which may be unaudited) prior to the date it becomes an Acquired Person and (y)
the aggregate amount of any Cash Equivalents held by such Acquired Person at the
time it becomes an Acquired Person.
9
<PAGE> 15
"PERMITTED CURRENCY" means the lawful currency of the United States or
a European Union member.
"PERMITTED DESIGNEE" means (i) a spouse or a child of a Permitted
Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child
of a Permitted Holder, (iii) in the event of the death or incompetence of a
Permitted Holder, his estate, heirs, executor, administrator, committee or other
personal representative or (iv) any Person so long as a Permitted Holder owns at
least 50% of the voting power of all classes of the voting stock of such Person.
"PERMITTED HOLDERS" means George S. Blumenthal, J. Barclay Knapp and
their Permitted Designees.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in
a Cable Controlled Property or in a Qualified Subsidiary (including, without
limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled
Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or
Guarantees or (iii) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary); (b) any Investments in Cash
Equivalents; (c) Investments by the Company in Indebtedness of a counter-party
to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that
are made, for purposes other than speculation, in connection with such contract
to hedge not more than the aggregate principal amount of the Indebtedness being
hedged (or, in the case of Indebtedness issued with original issue discount,
based on the amounts payable after the amortization of such discount); (d)
Investments by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Cable Controlled Subsidiary
or (ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance,
transfer or other conveyance of Equity Interests (other than Disqualified Stock)
in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of
the Company.
"PERMITTED LIENS" means (a) Liens in favor of the Company; (b) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not secure any property or assets of the Company or any of
its Subsidiaries other than the property or assets subject to the Liens prior to
such merger or consolidation; (c) liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or are being contested in good faith and by appropriate
proceedings; (d) Liens existing on the Issuance Date; (e) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor and (f) easements, rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties or minor
imperfections of title that, in the aggregate, are not material in amount, and
do not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Restricted Subsidiaries.
"PERMITTED NON-CONTROLLED ASSETS" means Equity Interests in any Person
primarily engaged, directly or indirectly, in one or more Cable Businesses if
such Equity Interests (x) were acquired by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale or any Investment otherwise
permitted under the terms of the Indenture and (y) to the extent that, after
giving pro forma effect to the acquisition thereof by the Company or any of its
Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of
Adjusted Total Assets based on the most recent consolidated balance sheet of the
Company.
10
<PAGE> 16
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREFERRED STOCK" means the 13% Senior Redeemable Exchangeable
Preferred Stock of the Company with an original aggregate liquidation preference
of $100,000,000.
"PRO FORMA EBITDA" means for any Person, for any period, the EBITDA of
such Person as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP after giving effect to the following: (i)
if, during or after such period, such Person or any of its Subsidiaries shall
have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries
for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Sale for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period and (ii) if,
during or after such period, such Person or any of its Subsidiaries completes an
acquisition of any Person or business which immediately after such acquisition
is a Subsidiary of such Person or whose assets are held directly by such Person
or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give
pro forma effect to the acquisition of such Person or business (without giving
effect to clause (iii) of the definition of Consolidated Net Income); and
provided further that, with respect to the Company, all of the foregoing
references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a
"Restricted Subsidiary" or "Restricted Subsidiaries" of the Company.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of November
19, 1999, between the Company and the Initial Purchasers.
"QUALIFIED SUBSIDIARY" means a Wholly Owned Subsidiary, or an entity
that will become a Wholly Owned Subsidiary after giving effect to the
transaction being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration, (i) is a Cable Business or
holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being
incurred to consummate such transaction) and (iii) has no encumbrances or
restrictions (other than such encumbrances or restrictions imposed or permitted
by this Indenture, the indentures governing the Old Notes or any other
instrument governing unsecured indebtedness of the Company which is pari passu
with the Notes) on its ability to pay dividends or make any other distributions
to the Company or any of its Subsidiaries.
"RATING AGENCIES" means (i) S&P, (ii) Moody's and (iii) if S&P or
Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories) and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining whether
the rating of the Notes has decreased by one or more gradations, gradations
within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the
equivalent gradations for another Rating Agency) shall be taken into account
(e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as
from BB-to B+, will constitute a decrease of one gradation).
"RATING DATE" means that date which is 90 days prior to the earlier of
(x) a Change of Control and (y) public notice of the occurrence of a Change of
Control or of the intention by the Company or any Permitted Holder to effect a
Change of Control.
11
<PAGE> 17
"RATINGS DECLINE" means the occurrence of any of the following events
on, or within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of the Company or any Person to effect a
Change of Control (which period shall be extended so long as the rating of any
of the Company's debt securities is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event that any of
the Company's debt securities are rated by both of the Rating Agencies on the
Rating Date as Investment Grade, the rating of such securities by either of the
Rating Agencies shall be below Investment Grade, (b) in the event that any of
the Company's debt securities are rated by either, but not both, of the Rating
Agencies on the Rating Date as Investment Grade, the rating of such securities
by both of the Rating Agencies shall be below Investment Grade, or (c) in the
event any of the Company's debt securities are rated below Investment Grade by
both of the Rating Agencies on the Rating Date, the rating of such securities by
either Rating Agency shall be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"REDEEMABLE DIVIDEND" means, for any dividend with regard to
Disqualified Stock, the quotient of the dividend divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Disqualified Stock.
"REGISTERED EXCHANGE OFFER" has the meaning set forth in the
Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
relating to the Notes, dated November 24, 1999, between the Company and the
Initial Purchasers and, with respect to any Additional Notes, one or more
registration rights agreements between the Company and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from time
to time, relating to rights given by the Company to the purchasers of Additional
Notes to register such Additional Notes under the Securities Act.
"REPLACEMENT ASSETS" means (w) Cable Assets, (x) Equity Interests of
any Person engaged, directly or indirectly, primarily in a Cable Business, which
Person is or will become on the date of acquisition thereof a Restricted
Subsidiary as a result of the Company's acquiring such Equity Interests, (y)
Permitted Non-Controlled Assets or (z) any combination of the foregoing.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is
not a Non-Restricted Subsidiary.
"RESTRICTED SUBSIDIARY PREFERRED STOCK DIVIDEND" means, for any
dividend with regard to preferred stock of a Restricted Subsidiary, the quotient
of the dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such preferred stock.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
12
<PAGE> 18
"SUBORDINATED DEBENTURES" means the debentures exchangeable by the
Company for the Preferred Stock in accordance with the Certificate of
Designations therefor.
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"TRUST OFFICER" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary
all of the Capital Stock of which (except directors' qualifying shares) is at
the time owned directly or indirectly by the Company.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
<S> <C>
"ADDITIONAL AMOUNTS"..........................................4.14
"AFFILIATE TRANSACTION".......................................4.11
"AGENT MEMBER"................................................2.01
"ASSET SALE OFFER"............................................4.10
"BANKRUPTCY LAW"..............................................6.01
"CHANGE OF CONTROL PAYMENT"...................................4.13
"COMMENCEMENT DATE"...........................................3.09
"COMMON DEPOSITARY"...........................................2.03
"CUSTODIAN"...................................................6.01
"DEFEASANCE"..................................................8.02
"EVENT OF DEFAULT"............................................6.01
"EXCESS PROCEEDS".............................................4.10
"GLOBAL NOTE".................................................2.01
"INCUR".......................................................4.08
"INITIAL NOTES".......................................... Preamble
"LEGAL HOLIDAY"..............................................10.08
"OFFER AMOUNT"................................................3.09
"OFFICER"....................................................10.10
"PAYING AGENT"................................................2.03
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
<S> <C>
"PAYMENT DEFAULT".............................................6.01
"PURCHASE DATE"...............................................3.09
"PURCHASE OFFER"..............................................4.13
"QIBS"........................................................2.01
"REFINANCING INDEBTEDNESS"....................................4.08
"REGULATION S"................................................2.01
"REGULATION S GLOBAL NOTES" ..................................2.01
"REGISTRAR"...................................................2.03
"RESTRICTED NOTES"............................................2.10
"RESTRICTED PAYMENTS".........................................4.09
"RULE 144A"...................................................2.01
"RULE 144A GLOBAL NOTES" .....................................2.01
"TENDER PERIOD"...............................................3.09
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "institutional trustee" means the Trustee; and
"OBLIGOR" on the Notes means the Company or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP consistently applied;
(c) references to "GAAP" shall mean GAAP in effect as of the time when and
for the period as to which such accounting principles are to be
applied;
(d) "OR" is not exclusive;
(e) words in the singular include the plural, and in the plural include the
singular;
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(f) provisions apply to successive events and transactions;
(g) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time; and
(h) a reference to "$" or U.S. Dollars is to United States dollars, a
reference to "(pound)" or pounds sterling is to British pounds sterling
and a reference to "euro" or euros is to European Monetary Union
euros.
ARTICLE II.
THE NOTES
SECTION 2.01 FORM AND DATING.
(a) General.
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated by reference and expressly made a part of this Indenture.
The Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
The Company shall furnish any such legend not contained in Exhibit A or Exhibit
B to the Trustee in writing. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of euro1,000 and integral
multiples thereof. The terms and provisions of the Notes set forth in Exhibit A
and Exhibit B are part of this Indenture and to the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
The Initial Notes are being offered and sold by the Company
pursuant to the Purchase Agreement.
Initial Notes offered and sold in reliance on Regulation S
under the Securities Act ("REGULATION S"), as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent Global
Notes in definitive, fully registered form without interest coupons with the
Global Note Legend and Regulation S Restricted Notes Legend set forth in Exhibit
A hereto (the "REGULATION S GLOBAL NOTES"). Initial Notes offered and sold to
Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the
Securities Act ("RULE 144A"), as provided in the Purchase Agreement, shall be
issued initially in the form of one or more permanent Global Notes in
definitive, fully registered form without interest coupons with the Global Notes
Legend and Rule 144A Restricted Notes Legend set forth in Exhibit A hereto (in
the case of Rule 144A Global Notes to be held on behalf of Euroclear, the
"EUROCLEAR RULE 144A GLOBAL NOTES," in the case of Rule 144A Global Notes to be
held on behalf of DTC, the "DTC RULE 144A GLOBAL NOTES," and collectively, the
"RULE 144A GLOBAL NOTES,") The Regulation S Restricted Notes Legend and the Rule
144A Restricted Notes Legend as set forth in Exhibit A hereto are herein
collectively called the "RESTRICTED NOTES LEGEND". Each Global Note shall be
deposited on behalf of the Initial Purchasers of the Notes represented thereby
with (i) in the case of
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Euroclear Rule 144A Global Notes and Regulation S Global Notes to be held on
behalf of Euroclear and Cedel the Common Depositary, at its London office, as
custodian for the Depositary, and registered in the name of the Common
Depositary or the nominee of the Common Depositary for the accounts of
designated agents holding on behalf of the Depositary, and (ii) in the case of
DTC Rule 144A Global Notes, with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary, in either case duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of each Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, the Common Depositary, or its
nominee, and the Depositary or its nominee as hereinafter provided.
Upon consummation of the Registered Exchange Offer, the
Exchange Notes may be issued in the form of one or more permanent Global Notes
in definitive, fully registered form without interest coupons with the Global
Notes Legend but not the Restricted Notes Legend set forth in Exhibit A hereto
(i) in the case of Euroclear Rule 144A Global Notes and Regulation S Global
Notes to be held on behalf of Euroclear and Cedel, registered in the name of the
Common Depositary or a nominee of the Common Depositary, and (ii) in the case of
DTC Rule 144A Global Notes, registered in the name of the Depositary or the
nominee of the Depositary, and in either case, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of such Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee the Common Depositary or its
nominee, and the Depositary or its nominee as hereinafter provided.
After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to the Initial
Notes and pursuant thereto, all requirements for Restricted Notes Legends on
such Initial Note will cease to apply.
(c) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be
applicable to transfers of beneficial interests in the Global Notes that are
held by the Holders through Euroclear or Cedel.
(d) Book-Entry Provisions.
This Section 2.01(d) shall apply only to the Regulation S
Global Notes, the Rule 144A Global Notes and the Exchange Notes issued in the
form of one or more permanent Global Notes (collectively, the "GLOBAL NOTES")
deposited with the Common Depositary, on behalf of the Depositary or the
Trustee, as custodian for the Depositary, as applicable.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.01(d), authenticate and deliver initially one or more Global
Notes that (i) in the case of Euroclear Rule 144A Global Notes and Regulation S
Global Notes to be held on behalf of Euroclear and Cedel, (A) shall be
registered in the name of the Common Depositary for such Global Note or the
nominee of the Common Depositary and (B) shall be delivered by the Trustee to
the Depositary or pursuant to the Depositary's instructions to the Common
Depositary as custodian for the Depositary and (ii) in the case of DTC Rule 144A
Global Notes (A) shall be registered in the name of the Depositary or the
nominee of the Depositary and (B) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as custodian for the Depositary.
Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary or by the
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Common Depositary or the Trustee, as the custodian of the Depositary or under
such Global Note, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of such Depositary
governing the exercise of the rights of an owner of a beneficial interest in any
Global Note.
SECTION 2.02 EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of an authorized officer of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate (1) Initial Notes for original issue up to an aggregate
principal amount stated in paragraph 6 of the Initial Notes and (2) Exchange
Notes for issue only in a Registered Exchange Offer, pursuant to the
Registration Rights Agreement, in exchange for Initial Notes for a like
principal amount. The Trustee shall, upon a written order of the Company signed
by an Officer, authenticate Additional Notes for original issue up to
euro150,000,000 aggregate principal amount. Upon original issue, Additional
Notes shall be treated as Initial Notes for all purposes of this Indenture, and
upon exchange for Notes registered under the Securities Act pursuant to a
Registered Exchange Offer, Additional Notes delivered in such exchange shall be
treated as Exchange Notes for all purposes of this Indenture. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders, the
Company or an Affiliate.
SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New
York, State of New York and London, England and, if and as long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, (i) offices or agencies
where the Notes may be presented for registration of transfer or for exchange
("REGISTRAR") and (ii) offices or agencies where the Notes may be presented for
payment ("PAYING AGENT"). The Company initially designates The Chase Manhattan
Bank (London) at its offices in London to act as principal Registrar and Paying
Agent and the Trustee at its corporate trust offices in New York, New York and
Chase Manhattan Bank Luxembourg S.A. to act as a Registrar and Paying Agent. The
principal Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents in such other locations as it shall determine. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
without prior notice to any Holder. The Company shall notify the Trustee of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as
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Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Affiliates may act as Paying Agent or Registrar.
Initially, The Chase Manhattan Bank (London) will act as common
depositary (the "COMMON DEPOSITARY") with respect to the Euroclear Rule 144A
Global Notes and Regulation S Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal or interest on the Notes, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any money disbursed by it. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or an Affiliate
of the Company) shall have no further liability for the money. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders.
SECTION 2.06 TRANSFER AND EXCHANGE.
Where Notes are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal amount
of Notes of other denominations, the Registrar shall register the transfer or
make the exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall issue and the
Trustee shall authenticate Notes at the Registrar's request. No service charge
shall be made for any registration of transfer or exchange (except as otherwise
expressly permitted herein), but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer tax or similar governmental
charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof).
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note for a period beginning at the opening of business 15
days before the day of any selection of Notes to be redeemed under Section 3.02
hereof and ending at the close of business on the day of selection, or (ii) to
register the transfer, or exchange, of any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
(a) Notwithstanding any provision to the contrary herein, so long as a
Global Note remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Note, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with
Section 2.01(b) and this Section 2.06(a); provided, however, that
beneficial interests in a Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Global Note in accordance with the transfer restrictions set forth in
the Restricted
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Notes Legend and under the heading "Transfer Restrictions" in the Company's
Offering Memorandum dated November 19, 1999.
(i) Except for transfers or exchanges made in accordance with clauses (ii)
through (iv) of this Section 2.06(a), transfers of a Global Note shall
be limited to transfers of such Global Note in whole, but not in part,
to nominees of the Depositary or to the custodians of the Depositary or
nominees thereof or to a successor of the Depositary or such
successor's nominee or to custodians of such successor Depositary or
nominees thereof.
(ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a
beneficial interest in the Rule 144A Global Note deposited with the
Depositary or the Trustee as custodian for the Depositary wishes at any
time to transfer its interest in such Rule 144A Global Note to a Person
who is required to take delivery thereof in the form of an interest in
the Regulation S Global Note, such owner may, subject to the rules and
procedures of the Depositary, exchange or cause the exchange of such
interest for an equivalent beneficial interest in the Regulation S
Global Notes. Upon receipt by the principal Registrar of (1)
instructions given in accordance with the Depositary's procedures from
an Agent Member directing the principal Registrar to credit or cause to
be credited a beneficial interest in the Regulation S Global Note in an
amount equal to the beneficial interest in the Rule 144A Global Note to
be exchanged, (2) a written order given in accordance with the
Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear or Cedel
account to be credited with such increase and (3) a certificate in the
form of Exhibit C attached hereto given by the Holder of such
beneficial interest, then the principal Registrar shall instruct the
Depositary to reduce or cause to be reduced the principal amount of the
Rule 144A Global Note and to increase or cause to be increased the
principal amount of the Regulation S Global Note by the aggregate
principal amount of the beneficial interest in the Rule 144A Global
Note equal to the beneficial interest in the Regulation S Global Note
to be exchanged or transferred, to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Regulation S Global Note equal to the reduction in the
principal amount of the Rule 144A Global Note and to debit or cause to
be debited from the account of the Person making such exchange or
transfer the beneficial interest in the Rule 144A Global Note that is
being exchanged or transferred.
(iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a
beneficial interest in the Regulation S Global Note deposited with the
Depositary or with the Trustee as custodian for the Depositary wishes
at any time to transfer its interest in such Regulation S Global Note
to a Person who is required to take delivery thereof in the form of an
interest in the Rule 144A Global Note, such Holder may, subject to the
rules and procedures of the Depositary, exchange or cause the exchange
of such interest for an equivalent beneficial interest in the Rule 144A
Global Note. Upon receipt by the principal Registrar of (1)
instructions from the Depositary, directing the principal Registrar to
credit or cause to be credited a beneficial interest in the Rule 144A
Global Note equal to the beneficial interest in the Regulation S Global
Note to be exchanged or transferred, such instructions to contain
information regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in accordance
with the Depositary's procedures containing information regarding the
participant account of the Depositary and (3) a certificate in the form
of Exhibit D attached hereto given by the owner of such beneficial
interest, then the principal Registrar
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will instruct the Depositary to reduce or cause to be reduced the
Regulation S Global Note and to increase or cause to be increased the
principal amount of the Rule 144A Global Note by the aggregate
principal amount of the beneficial interest in the Regulation S Global
Note to be exchanged or transferred, and the principal Registrar shall
instruct the Depositary, concurrently with such reduction, to credit or
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Rule 144A Global Note equal
to the reduction in the principal amount of the Regulation S Global
Note and to debit or cause to be debited from the account of the Person
making such exchange or transfer the beneficial interest in the
Regulation S Global Note that is being exchanged or transferred.
(iv) DTC Rule 144A Global Note to Euroclear Rule 144A Global Note. If an
owner of a beneficial interest in the DTC Rule 144A Global Note
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such DTC Rule
144A Global Note to a Person who is required to take delivery thereof
in the form of an interest in the Euroclear Rule 144A Global Note, such
Holder may, subject to the rules and procedures of the Depositary,
exchange or cause the exchange of such interest for an equivalent
beneficial interest in the Euroclear Rule 144A Global Note. Upon
receipt by the principal Registrar of (1) instructions from the
Depositary, directing the principal Registrar to credit or cause to be
credited a beneficial interest in the Euroclear Rule 144A Global Note
equal to the beneficial interest in the DTC Rule 144A Global Note to be
exchanged or transferred, such instructions to contain information
regarding the participant account with the Depositary to be credited
with such increase, (2) a written order given in accordance with the
Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear account to be
credited with such increase and (3) a certificate in the form of
Exhibit D attached hereto given by the owner of such beneficial
interest, then the principal Registrar will instruct the Depositary to
reduce or cause to be reduced the DTC Rule 144A Global Note and to
increase or cause to be increased the principal amount of the Euroclear
Rule 144A Global Note by the aggregate principal amount of the
beneficial interest in the DTC Rule 144A Global Note to be exchanged or
transferred, and the principal Registrar shall instruct the Depositary,
concurrently with such reduction, to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Euroclear Rule 144A Global Note equal to the reduction
in the principal amount of the DTC Rule 144A Global Note and to debit
or cause to be debited from the account of the Person making such
exchange or transfer the beneficial interest in the DTC Rule 144A
Global Note that is being exchanged or transferred.
(v) Euroclear Rule 144A Global Note to DTC Rule 144A Global Note. If an
owner of a beneficial interest in the Euroclear Rule 144A Global Note
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such
Euroclear Rule 144A Global Note to a Person who is required to take
delivery thereof in the form of an interest in the DTC Rule 144A Global
Note, such Holder may, subject to the rules and procedures of the
Depositary, exchange or cause the exchange of such interest for an
equivalent beneficial interest in the DTC Rule 144A Global Note. Upon
receipt by the principal Registrar of (1) instructions from the
Depositary, directing the principal Registrar to credit or cause to be
credited a beneficial interest in the DTC Rule 144A Global Note equal
to the beneficial interest in the Euroclear Rule 144A Global Note to be
exchanged or transferred, such instructions to contain information
regarding the participant account with the Depositary to be credited
with such increase, (2) a written order given in accordance with the
Depositary's
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procedures containing information regarding the participant account of
the Depositary and (3) a certificate in the form of Exhibit D attached
hereto given by the owner of such beneficial interest, then the
principal Registrar will instruct the Depositary to reduce or cause to
be reduced the Euroclear Rule 144A Global Note and to increase or cause
to be increased the principal amount of the DTC Rule 144A Global Note
by the aggregate principal amount of the beneficial interest in the
Euroclear Rule 144A Global Note to be exchanged or transferred, and the
principal Registrar shall instruct the Depositary, concurrently with
such reduction, to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the DTC
Rule 144A Global Note equal to the reduction in the principal amount of
the Euroclear Rule 144A Global Note and to debit or cause to be debited
from the account of the Person making such exchange or transfer the
beneficial interest in the Euroclear Rule 144A Global Note that is
being exchanged or transferred.
(vi) Global Note to Restricted Note. If an owner of a beneficial interest in
a Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary wishes at any time to transfer its
interest in such Global Note to a Person who is required to take
delivery thereof in the form of a Restricted Note, such owner may,
subject to the rules and procedures of the Depositary, cause the
exchange of such interest for one or more Restricted Notes of any
authorized denomination or denominations and of the same aggregate
principal amount. Upon receipt by the principal Registrar of (1)
instructions from the Depositary directing the principal Registrar to
authenticate and deliver one or more Restricted Notes of the same
aggregate principal amount as the beneficial interest in the Global
Note to be exchanged, such instructions to contain the name or names of
the designated transferee or transferees, the authorized denomination
or denominations of the Restricted Notes to be so issued and
appropriate delivery instructions, (2) a certificate in the form of
Exhibit E attached hereto given by the owner of such beneficial
interest to the effect set forth therein, (3) a certificate in the form
of Exhibit F attached hereto given by the Person acquiring the
Restricted Notes for which such interest is being exchanged, to the
effect set forth therein, and (4) such other certifications, legal
opinions or other information as the Company may reasonably require to
confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of
the Securities Act, then the principal Registrar, will instruct the
Depositary to reduce or cause to be reduced such Global Note by the
aggregate principal amount of the beneficial interest therein to be
exchanged and to debit or cause to be debited from the account of the
Person making such transfer the beneficial interest in the Global Note
that is being transferred, and concurrently with such reduction and
debit the Company shall execute, and the Trustee shall authenticate and
deliver, one or more Restricted Notes of the same aggregate principal
amount in accordance with the instructions referred to above.
(vii) Restricted Note to Restricted Note. If a Holder of a Restricted Note
wishes at any time to transfer such Restricted Note to a Person who is
required to take delivery thereof in the form of a Restricted Note,
such Holder may, subject to the restrictions on transfer set forth
herein and in such Restricted Note, cause the exchange of such
Restricted Note for one or more Restricted Notes of any authorized
denomination or denominations and of the same aggregate principal
amount. Upon receipt by the principal Registrar of (1) such Restricted
Note, duly endorsed as provided herein, (2) instructions from such
Holder directing the principal Registrar to authenticate and deliver
one or more Restricted Notes of the same aggregate principal amount as
the Restricted Note to be exchanged, such instructions to contain the
name or authorized denomination
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or denominations of the Restricted Notes to be so issued and
appropriate delivery instructions, (3) a certificate from the Holder of
the Restricted Note to be exchanged in the form of Exhibit E attached
hereto, (4) a certificate in the form of Exhibit F attached hereto
given by the Person acquiring the Restricted Notes for which such
interest is being exchanged, to the effect set forth therein, and (5)
such other certifications, legal opinions or other information as the
Company may reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act, then the Registrar
shall cancel or cause to be canceled such Restricted Note and
concurrently therewith, the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Restricted Notes of the
same aggregate principal amount, in accordance with the instructions
referred to above.
(viii) Other Exchanges. In the event that a beneficial interest in a Global
Note is exchanged for Notes in definitive registered form pursuant to
Section 2.10, prior to the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of clauses (ii) and (iii) above (including the
certification requirements intended to ensure that such transfers
comply with Rule 144A, Rule 144, Regulation S or any other available
exemption from registration, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(ix) Restricted Period. Prior to the termination of the Restricted Period
with respect to the issuance of the Notes, transfers of interests in
the Regulation S Global Note to "U.S. Persons" (as defined in
Regulation S) shall be limited to transfers to QIBs. The Company shall
advise the Trustee as to the termination of the Restricted Period and
the Trustee may rely conclusively thereon.
(b) Except in connection with a Registered Exchange Offer or a Shelf
Registration Statement contemplated by and in accordance with the terms
of the Registration Rights Agreement, if Initial Notes are issued upon
the transfer, exchange or replacement of Initial Notes bearing the
Restricted Notes Legend set forth in Exhibit A hereto, or if a request
is made to remove such Restricted Notes Legend on Initial Notes, the
Initial Notes so issued shall bear the applicable Restricted Notes
Legend, or the Restricted Notes Legend shall not be removed, as the
case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel licensed to practice
law in the State of New York, as may be reasonably required by the
Company, that neither the legend nor the restrictions on transfer set
forth therein are required to ensure that transfers thereof comply with
the provisions of Rule 144A, Rule 144, Regulation S or any other
available exemption from registration under the Securities Act or, with
respect to Restricted Notes, that such Notes are not "restricted"
within the meaning of Rule 144 under the Securities Act. Upon provision
of such satisfactory evidence, the Trustee, at the direction of the
Company, shall authenticate and deliver Initial Notes that do not bear
the legend.
(c) Neither the Company nor the Trustee shall have any responsibility for
any actions taken or not taken by the Depositary and the Company shall
have no responsibility for any actions taken or not taken by the
Trustee as agent or custodian of the Depositary.
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SECTION 2.07 REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed
or wrongfully taken or if such Note is mutilated and is surrendered to the
Trustee, the Company shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's and the Company's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of both to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Note is held by a bona
fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, such Note ceases to be outstanding and interest on it ceases to
accrue.
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES; GLOBAL NOTES.
(a) Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
(b) A Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of
certificated Notes only if such transfer complies with Section 2.06 and
(i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global
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Note or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, or (ii) an
Event of Default has occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial owners thereof
in the form of certificated Notes pursuant to this Section 2.10 shall
be surrendered by or on behalf of the Depositary to the Trustee to be
so transferred, in whole or from time to time in part, without charge,
and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Note, an equal aggregate principal amount
of Initial Notes of authorized denominations in the form of
certificated Notes. Any portion of a Global Note transferred pursuant
to this Section shall be executed, authenticated and delivered only in
denominations of euro1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any Initial
Note in the form of certificated Notes delivered in exchange for an
interest in the Global Notes shall, except as otherwise provided by
Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A
hereto (the "RESTRICTED NOTES").
(d) The registered Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(e) In the event of the occurrence of either of the events specified in
Section 2.10(b), the Company will promptly make available to the
Trustee a reasonable supply of certificated Notes in definitive, fully
registered form without interest coupons.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall promptly cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
canceled Notes as the Company directs. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it
shall pay such defaulted interest plus any interest payable on the defaulted
interest, in any lawful manner. It may pay such defaulted interest, plus any
such interest payable on it, to the Persons who are Holders on a subsequent
special record date. The Company shall fix any such record date and payment
date, provided that no such record date shall be less than 10 days prior to the
related payment date for such defaulted interest. At least 15 days before any
such record date, the Company shall mail to Holders a notice that states the
special record date, the related payment date and amount of such interest to be
paid.
ARTICLE III.
REDEMPTION
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of the Notes and Section 3.07 hereof or pursuant to the
Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes
and Section 7 of the Exchange Notes), it shall notify the Trustee of the
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redemption date and the principal amount of Notes to be redeemed, and in
connection with an Optional Tax Redemption as provided in the Notes, such notice
shall be accompanied by an Officer's Certificate to the effect that the
conditions to such redemption contained herein have been complied with. The
Company shall give each notice provided for in this Section 3.01 at least 50
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, selection
of Notes shall be made by the Trustee on a pro rata basis or by lot or by method
that complies with the requirements of any exchange on which the Notes are
listed and that the Trustee considers fair and appropriate, provided that no
Notes of euro1,000 or less shall be redeemed in part. The Trustee shall make
the selection not more than 60 days and not less than 30 days before the
redemption date from Notes outstanding not previously called for redemption.
Notes and portions of Notes selected shall be in amounts of euro1,000 or
integral multiples of euro1,000. Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address. The notice
shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is to be redeemed in part only, the portion of the
principal amount thereof redeemed, and that, after the redemption date,
upon surrender of such Note, a new Note in principal amount equal to
the unredeemed portion thereof shall be issued in the name of the
Holder thereof upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price plus accrued interest, if any;
(f) that interest on Notes called for redemption ceases to accrue on and
after the redemption date; and
(g) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense; provided that the Company shall have
delivered to the Trustee, at least 45 days prior to the redemption date, an
Officer's Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice, as provided in the preceding
paragraph.
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SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become due and payable on the redemption
date at the price set forth in the Note. A notice of redemption may not be
conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money not required
for that purpose.
SECTION 3.06 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION AND OPTIONAL TAX REDEMPTION.
The Company may redeem all or any portion of the Notes, upon the terms
and at the redemption prices set forth in each of the Notes. The Company may
also redeem all of the Notes in accordance with the Optional Tax Redemption
provision of the Notes (Section 8 of the Initial Notes and Section 7 of the
Exchange Notes). Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
SECTION 3.09 ASSET SALE OFFER AND PURCHASE OFFER.
(a) In the event that the Company shall commence an offer to all Holders of
the Notes to purchase Notes pursuant to Section 4.10 hereof (the "ASSET
SALE OFFER") or pursuant to Section 4.13 hereof (the "PURCHASE OFFER"),
the Company shall follow the procedures in this Section 3.09.
(b) The Asset Sale Offer or the Purchase Offer, as the case may be, shall
remain open for a period specified by the Company which shall be no
less than 30 calendar days and no more than 40 calendar days following
its commencement (the "COMMENCEMENT DATE") (as determined in accordance
with Section 4.10 or 4.13 hereof, as the case may be), except to the
extent that a longer period is required by applicable law (the "TENDER
PERIOD"). Upon the expiration of the Tender Period (the "PURCHASE
DATE"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 or 4.13 hereof (the
"OFFER AMOUNT") or, if less than the Offer Amount has been tendered,
all Notes tendered in response to the Asset Sale Offer or the Purchase
Offer, as the case may be.
(c) If the Purchase Date is (i) on or after an interest payment record date
and (ii) on or before the related interest payment date, any accrued
interest shall be paid to the Person in whose name a Note is registered
at the close of business on such record date, and no additional
interest will be payable to Holders who tender Notes pursuant to the
Asset Sale Offer or the Purchase Offer, as the case may be.
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(d) The Company shall provide the Trustee with notice of the Asset Sale
Offer or the Purchase Offer, as the case may be, at least 10 days
before the Commencement Date.
(e) On or before the Commencement Date, the Company or the Trustee (at the
expense of the Company) shall send, by first class mail, a notice to
each of the Holders, which shall govern the terms of the Asset Sale
Offer or the Purchase Offer and shall state:
(i) that the Asset Sale Offer or the Purchase Offer is being made pursuant
to this Section 3.09 and, as applicable, Section 4.10 or 4.13 hereof
and the length of time the Asset Sale Offer or the Purchase Offer will
remain open;
(ii) the Offer Amount, the purchase price (as determined in accordance with
Section 4.10 or 4.13 hereof) and the Purchase Date, and in the case of
a Purchase Offer made pursuant to Section 4.13 hereof, that all Notes
tendered will be accepted for payment;
(iii) that any Note or portion thereof not tendered or accepted for payment
will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the purchase price,
any Note or portion thereof accepted for payment pursuant to the Asset
Sale Offer or the Purchase Offer will cease to accrue interest after
the Purchase Date;
(v) that Holders electing to have a Note or portion thereof purchased
pursuant to any Asset Sale Offer or Purchase Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice prior to the close of business on the
third Business Day preceding the Purchase Date;
(vi) that Holders will be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be, receives, not
later than the close of business on the second Business Day preceding
the Purchase Date, or such longer period as may be required by law, a
letter or a telegram, telex or facsimile transmission (receipt of which
is confirmed and promptly followed by a letter) setting forth the name
of the Holder, the principal amount of the Note or portion thereof the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note or portion thereof purchased;
(vii) that, in the event of an Asset Sale Offer, if the aggregate principal
amount of Notes surrendered by Holders exceeds the Offer Amount, the
Trustee will select the Notes to be purchased pro rata or by a method
that complies with the requirements of any exchange on which the Notes
are listed and that the Trustee considers fair and appropriate with
such adjustments as may be deemed appropriate by the Company so that
only Notes in denominations of euro1,000, or integral multiples
thereof, shall be purchased; and
(viii) that Holders whose Notes were purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered.
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In addition, the notice shall, to the extent permitted by applicable
law, be accompanied by a copy of the information regarding the Company and its
Subsidiaries which is required to be contained in the most recent Quarterly
Report on Form 10-Q or Annual Report on Form 10-K (including any financial
statements or other information required to be included or incorporated by
reference therein) and any Reports on Form 8-K filed since the date of such
Quarterly Report or Annual Report (or would have been required to file if the
Company remained a company incorporated in the United States), as the case may
be, which the Company has filed (or would have been required to file if it
remained a company incorporated in the United States) with the SEC on or prior
to the date of the notice. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer or the Purchase Offer, as the case may be.
(f) At least one Business Day prior to the Purchase Date, the Company shall
irrevocably deposit with the Trustee or a Paying Agent in immediately
available funds an amount equal to the Offer Amount to be held for
payment in accordance with the terms of this Section. On the Purchase
Date, the Company shall, to the extent lawful, (i) accept for payment
the Notes or portions thereof tendered pursuant to the Asset Sale Offer
or the Purchase Offer, (ii) deliver or cause the depositary or Paying
Agent to deliver to the Trustee Notes so accepted and (iii) deliver to
the Trustee an Officer's Certificate stating such Notes or portions
thereof have been accepted for payment by the Company in accordance
with the terms of this Section 3.09. The depositary, the Paying Agent
or the Company, as the case may be, shall promptly (but in any case not
later than ten (10) calendar days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price
of the Notes tendered by such Holder and accepted by the Company for
purchase, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so accepted
shall be promptly mailed or delivered by or on behalf of the Company to
the Holder thereof. The Company will publicly announce in a newspaper
of general circulation the results of the Asset Sale Offer or the
Purchase Offer on the Purchase Date.
(g) For the purposes of calculating the allocation of available Excess
Proceeds to the Notes and each issue of the Notes and Other Qualified
Notes on a pro rata basis according to accreted value or principal
amount, as the case may be, the relevant principal amount or the
accreted value, as the case may be, of any Other Qualified Notes
denominated in a currency other than United States dollars will be
notionally converted into United States dollars from the currency the
Notes and such Other Qualified Notes are denominated in (the "BASE
CURRENCY");
(i) in the case of determining the maximum principal amount or accreted
value of Notes and Other Qualified Notes that may be purchased out of
the Excess Proceeds, at the noon buying rate in the City of New York as
certified for customs purposes by the Federal Reserve Bank of New York
for cable transfers in the Base Currency (the "NOON BUYING RATE") on
the Business Day which is 10 Business Days prior to the Commencement
Date; and
(ii) in the case of determining the allocation of the remaining Excess
Proceeds if the aggregate principal amount or accreted value, as the
case may be, of Notes and Other Qualified Notes surrendered by holders
in the Asset Sale Offer exceeds the remaining amount of Excess
Proceeds, at the Noon Buying Rate on the second Business Day preceding
the Purchase Date.
(h) The Asset Sale Offer or the Purchase Offer shall be made by the Company
in compliance with all applicable provisions of the Exchange Act, and
all applicable tender offer
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rules promulgated thereunder, and shall include all instructions and
materials necessary to enable such Holders to tender their Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay the principal of, premium, if any, and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent (other than the Company or an Affiliate of the Company) holds on
that date money designated for and sufficient to pay all principal and interest
then due. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i) the
overdue principal and premium, if any, at the rate borne by the Notes,
compounded semiannually; and (ii) overdue installments of interest (without
regard to any applicable grace period) at the same rate, compounded
semiannually.
SECTION 4.02 REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall file with the SEC and
furnish to the Trustee and to the Holders of Notes, all quarterly and annual
financial information required to be contained in a filing with the SEC on Forms
10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign
private issuers in the event the Company becomes a corporation organized under
the laws of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands), including a "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants, in each case, in the form required by the rules and
regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will
apply notwithstanding that the Company becomes a corporation organized under the
laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands.
SECTION 4.03 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officer's Certificate stating that a
review of the activities of the Company and its subsidiaries during the
preceding fiscal year has been made under the supervision of the signing Officer
with a view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under, and complied with the covenants and conditions
contained in, this Indenture, and further stating, as to the Officer signing
such certificate, that to the best of his knowledge the Company has kept,
observed, performed and fulfilled each and every covenant, and complied with the
covenants and conditions contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he may have knowledge) and that to
the best of his knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest, if any, on
the Notes are prohibited.
One of the Officers signing such Officer's Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon becoming aware of any Default or Event of Default
an Officer's Certificate specifying such Default or Event of Default.
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Immediately upon the occurrence of any event giving rise to the accrual
of Special Interest (as such term is defined in Exhibit A hereto) or the
cessation of such accrual, the Company shall give the Trustee notice thereof and
of the event giving rise to such accrual or cessation (such notice to be
contained in an Officer's Certificate) and prior to receipt of such Officer's
Certificate the Trustee shall be entitled to assume that no such accrual has
commenced or ceased, as the case may be.
SECTION 4.04 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.05 CORPORATE EXISTENCE.
Subject to Article V hereof, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each subsidiary
of the Company in accordance with the respective organizational documents of
each subsidiary and the rights (charter and statutory), licenses and franchises
of the Company and its subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its subsidiaries taken as a
whole and that the loss thereof is not adverse in any material respect to the
Holders. The Company shall notify the Trustee in writing of any subsidiary which
qualifies as a Material Subsidiary and is not specified in clause (i) of the
definition thereof.
SECTION 4.06 TAXES.
The Company shall, and shall cause each of its subsidiaries to, pay
prior to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings.
SECTION 4.07 LIMITATIONS ON LIENS.
Neither the Company nor any of its Restricted Subsidiaries may,
directly or indirectly create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except:
(a) Permitted Liens;
(b) Liens securing Indebtedness and related obligations to the extent such
Indebtedness and related obligations are permitted under Sections
4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof;
(c) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under Section 4.08 hereof; and
(d) Liens securing Refinancing Indebtedness permitted to be incurred under
Section 4.08 hereof; provided that the Refinancing Indebtedness so
issued and secured by such Lien shall not be secured by any property or
assets of the Company or any of its Restricted Subsidiaries other than
the property or assets subject to the Liens securing such Indebtedness
being refinanced.
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SECTION 4.08 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable with respect
to (collectively, "INCUR") any Indebtedness (including Acquired Debt)
and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of
preferred stock that is Disqualified Stock; provided, however, that the
Company may incur Indebtedness or issue shares of Disqualified Stock
and any of its Restricted Subsidiaries may issue shares of preferred
stock that is Disqualified Stock if after giving effect to such
issuance or incurrence on a pro forma basis, the sum of (x)
Indebtedness of the Company and its Restricted Subsidiaries, on a
consolidated basis, (y) the liquidation value of outstanding preferred
stock of Restricted Subsidiaries and (z) the aggregate amount payable
by the Company and its Restricted Subsidiaries, on a consolidated
basis, upon redemption of Disqualified Stock to the extent such amount
is not included in the preceding clause (y) shall be less than the
product of Annualized Pro Forma EBITDA for the latest fiscal quarter
for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or
such Disqualified Stock or preferred stock is issued multiplied by 7.0,
determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued,
as the case may be, at the beginning of such quarter.
(b) The foregoing limitations in Section 4.08(a) shall not apply to:
(i) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness pursuant to the Credit Facility;
(ii) the issuance by any Restricted Subsidiary of preferred stock (other
than Disqualified Stock) to the Company, any Restricted Subsidiary of
the Company or the holders of Equity Interests in any Restricted
Subsidiary on a pro rata basis to such holders;
(iii) the incurrence of Indebtedness or the issuance of preferred stock by
the Company or any of its Restricted Subsidiaries the proceeds of which
are (or the credit support provided by any such Indebtedness is), in
each case, used to finance the construction, capital expenditure and
working capital needs of a Cable Business (including, without
limitation, payments made pursuant to any License), the acquisition of
Cable Assets or the Capital Stock of a Qualified Subsidiary;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount not to exceed
$100.0 million at any time;
(v) the incurrence by the Company or any Restricted Subsidiary of any
Permitted Acquired Debt;
(vi) the incurrence by the Company or any Subsidiary of Indebtedness issued
in exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, or refund the Notes, the 2006 Notes, the
2009 Notes, Existing Indebtedness or Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness incurred
pursuant to Section 4.08(a) hereof (the "REFINANCING INDEBTEDNESS");
provided, however, that (1) the principal amount of, and any premium
payable in respect of, such Refinancing
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Indebtedness shall not exceed the principal amount of Indebtedness so
extended, refinanced, renewed, replaced or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (2) the
Refinancing Indebtedness shall have (A) a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced or
refunded, and (B) a stated maturity no earlier than the stated maturity
of, the Indebtedness being extended, refinanced, renewed, replaced or
refunded; and (3) the Refinancing Indebtedness shall be subordinated in
right of payment to the Notes as and to the extent of the Indebtedness
being extended, refinanced, renewed, replaced or refunded;
(vii) the issuance of the Preferred Stock in lieu of payment of cash interest
on the Subordinated Debentures or the incurrence by the Company of
Indebtedness represented by the Subordinated Debentures upon the
exchange of the Preferred Stock in accordance with the Certificate of
Designations therefor;
(viii) Indebtedness under Exchange Rate Contracts, provided that such Exchange
Rate Contracts are related to payment obligations under Existing
Indebtedness or Indebtedness incurred under Section 4.08(a) or (b)
hereof that are being hedged thereby, and not for speculation and that
the aggregate notional amount under each such Exchange Rate Contract
does not exceed the aggregate payment obligations under such
Indebtedness;
(ix) Indebtedness under Interest Rate Agreements, provided that the
obligations under such agreements are related to payment obligations on
Existing Indebtedness or Indebtedness otherwise incurred pursuant to
Section 4.08(a) or (b) hereof, and not for speculation;
(x) the incurrence of Indebtedness between the Company and any Restricted
Subsidiary, between or among Restricted Subsidiaries and between any
Restricted Subsidiary and other holders of Equity Interests of such
Restricted Subsidiary (or other Persons providing funding on their
behalf) on a pro rata basis and on substantially identical principal
financial terms; provided, however, that if any such Restricted
Subsidiary that is the payee of any such Indebtedness ceases to be a
Restricted Subsidiary or transfers such Indebtedness (other than to the
Company or a Restricted Subsidiary of the Company), such events shall
be deemed, in each case, to constitute the incurrence of such
Indebtedness by the Company or by a Restricted Subsidiary, as the case
may be, at the time of such event; and
(xi) Indebtedness of the Company and/or any Restricted Subsidiary in respect
of performance bonds of the Company or any Subsidiary or surety bonds
provided by the Company or any Restricted Subsidiary received in the
ordinary course of business in connection with the construction or
operation of a Cable Business.
(c) Any redesignation of a Non-Restricted Subsidiary as a Restricted
Subsidiary shall be deemed for purposes of this Section 4.08 to be an
incurrence of Indebtedness by the Company and its Restricted
Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as
of the time of such redesignation to the extent such Indebtedness does
not already constitute Indebtedness of the Company or one of its
Restricted Subsidiaries.
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SECTION 4.09 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests
(other than (x) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or such Restricted
Subsidiary, (y) dividends or distributions payable to the Company or
any Wholly Owned Subsidiary of the Company, or (z) pro rata dividends
or pro rata distributions payable by a Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company (other than any such Equity Interests owned by
the Company or any Wholly Owned Subsidiary of the Company);
(iii) voluntarily purchase, redeem or otherwise acquire or retire for value
any Indebtedness that is subordinated to the Notes; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to
as "RESTRICTED PAYMENTS"), unless, at the time of such Restricted
Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (including Restricted Payments permitted by
clauses (ii) through (x) of Section 4.09(b)), is less than the sum of
(x) the difference between Cumulative EBITDA and 1.5 times Cumulative
Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash
received by the Company or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which is or is required to
be repaid or returned to such Non-Restricted Subsidiary); provided,
however, that to the extent that any Restricted Investment that was
made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the amount credited pursuant to this
clause (z) shall be the lesser of (A) the cash received with respect to
such sale, liquidation or repayment of such Restricted Investment (less
the cost of such sale, liquidation or repayment, if any) and (B) the
initial amount of such Restricted Investment, in each case as
determined in good faith by the Company's Board of Directors.
(b) The foregoing provisions in Section 4.09(a) shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(ii) (x) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company or any Restricted Subsidiary or (y) an
Investment in any Person, in each case, in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity
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Interests (other than any Disqualified Stock) of the Company, provided
that the Company delivers to the Trustee:
(1) with respect to any transaction involving in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's
Certificate certifying that such transaction is approved by a majority
of the directors on the Board of Directors; and
(2) with respect to any transaction involving in excess of $25.0 million,
an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment
banking firm of national standing with high yield experience, together
with an Officer's Certificate to the effect that such opinion complies
with this clause (2);
(iii) Investments by the Company or any Restricted Subsidiary in a
Non-Controlled Subsidiary which (A) has no Indebtedness on a
consolidated basis other than Indebtedness incurred to finance the
purchase of equipment used in a Cable Business, (B) has no restrictions
(other than restrictions imposed or permitted by this Indenture or the
indentures governing the Other Qualified Notes or any other instrument
governing unsecured indebtedness of the Company which is pari passu
with the Notes) on its ability to pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries, (C)
is or will be a Cable Business and (D) uses the proceeds of such
Investment for constructing a Cable Business or the working capital
needs of a Cable Business;
(iv) the redemption, purchase, defeasance, acquisition or retirement of
Indebtedness that is subordinated to the Notes (including premium, if
any, and accrued and unpaid interest) made by exchange for, or out of
the proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of (A) Equity Interests of the
Company or (B) Refinancing Indebtedness permitted to be incurred under
Section 4.08 hereof;
(v) Investments by the Company or any Restricted Subsidiary in a
Non-Controlled Subsidiary which is or will be a Cable Business in an
amount not to exceed $100.0 million in the aggregate plus the sum of
(x) cash received by the Company or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which s or is required to be
repaid or returned to such Non-Restricted Subsidiary) and (y) Capital
Stock Sale Proceeds (excluding the aggregate net sale proceeds to be
received upon conversion of the Convertible Subordinated Notes);
(vi) Investments by the Company or any Restricted Subsidiary in Permitted
Non-Controlled Assets;
(vii) Investments by the Company or any Restricted Subsidiary in SDN Limited,
a joint venture organized to operate a digital terrestrial television
multiplex, in an amount not exceeding (pound)11.4 million.
(viii) the extension by the Company or any Restricted Subsidiary of trade
credit to a Non-Restricted Subsidiary extended on usual and customary
terms in the ordinary course of business, provided that the aggregate
amount of such trade credit shall not exceed $25.0 million at any one
time;
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(ix) the payment of cash dividends on the Preferred Stock accruing on or
after February 15, 2004 or any mandatory redemption or repurchase of
the Preferred Stock, in each case, in accordance with the Certificate
of Designations therefor; and
(x) the exchange of all of the outstanding shares of Preferred Stock for
Subordinated Debentures in accordance with the Certificate of
Designations for the Preferred Stock.
(c) Any Investment in a Subsidiary (other than the issuance, transfer or
other conveyance of Equity Interests of the Company (or any Capital
Stock Sale Proceeds therefrom)) that is designated by the Board of
Directors as a Non-Restricted Subsidiary shall become a Restricted
Payment made on the date of such designation in the amount of the
greater of (x) the book value of such Subsidiary on the date such
Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market
value of such Subsidiary on such date as determined (A) in good faith
by the Board of Directors of such Subsidiary if such fair market value
is determined to be less than $25.0 million and (B) by an investment
banking firm of national standing with high yield underwriting
expertise if such fair market value is determined to be in excess of
$25.0 million.
(d) Not later than the fifth Business Day after making any Restricted
Payment (other than those referred to in sub-clause (viii) of Section
4.09(b)), the Company shall deliver to the Trustee an Officer's
Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this
Section 4.09 were computed, which calculations may be based upon the
Company's latest available financial statements.
SECTION 4.10 ASSET SALES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to cause, make or suffer to exist any Asset Sale, unless:
(i) no Default exists or is continuing immediately prior to and after
giving effect to such Asset Sale;
(ii) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced for purposes of this Section 4.10 by a
resolution of the Board of Directors set forth in an Officer's
Certificate delivered to the Trustee) of the assets sold or otherwise
disposed of; and
(iii) at least 80% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of (w) Cash Equivalents, (x)
Replacement Assets, (y) publicly traded Equity Interests of a Person
who is, directly or indirectly, engaged primarily in one or more Cable
Businesses; provided, however, that the Company or such Restricted
Subsidiary shall Monetize such Equity Interests by sale to one or more
Persons (other than to the Company or a Subsidiary thereof) at a price
not less than the fair market value thereof within 180 days of the
consummation of such Asset Sale, or (z) any combination of the
foregoing clauses (w) through (y); provided, however, that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the
Company or any Restricted Subsidiary (other than liabilities that are
by their terms subordinated to the Notes) that are assumed by the
transferee of any such assets and (y) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such
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transferee that are within five Business Days converted by the Company
or such Restricted Subsidiary into cash, shall be deemed to be Cash
Equivalents (to the extent of the Cash Equivalents received in such
conversion) for purposes of this clause (iii).
(b) Within 360 days after any Asset Sale, the Company (or the Restricted
Subsidiary, as the case may be) shall cause the Net Proceeds from such
Asset Sale:
(i) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary; or
(ii) to be invested or reinvested in Replacement Assets.
Pending final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture or the
indentures for the Other Qualified Notes.
Any Net Proceeds from any Asset Sale that are not used or reinvested as
provided in the preceding sentence constitute "EXCESS PROCEEDS." When the
aggregate amount of Excess Proceeds exceeds $15 million, the Company shall make
an offer (an "ASSET SALE OFFER") to all holders of Notes and Other Qualified
Notes to purchase the maximum principal amount of Notes and Other Qualified
Notes (determined on a pro rata basis according to the accreted value or
principal amount, as the case may be, of the Notes and the Other Qualified Notes
and in accordance with Section 3.09(g)(i)) that may be purchased out of the
Excess Proceeds (x) with respect to the Other Qualified Notes, based on the
terms set forth in the indenture related to each issue of the Other Qualified
Notes and (y) with respect to the Notes, at an offer price in cash in an amount
equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in Section 3.09 hereof. To the extent
that the aggregate principal amount or accreted value, as the case may be, of
Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use such deficiency for general
corporate purposes. If the aggregate principal amount or accreted value, as the
case may be, of Notes and Other Qualified Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds shall
be allocated pro rata according to accreted value or principal amount, as the
case may be, to the Notes and each issue of the Other Qualified Notes and in
accordance with Section 3.09(g)(ii), and the Trustee shall select the Notes to
be purchased from the amount allocated to the Notes on the basis set forth in
Section 3.09(e) hereof. Upon completion of such offers to purchase each of the
Notes and the Other Qualified Notes, the amount of Excess Proceeds will be reset
at zero.
(c) Notwithstanding the provisions of Sections 4.10(a) and (b): the Company
and its Subsidiaries may:
(i) sell, lease, transfer, convey or otherwise dispose of assets or
property acquired after October 14, 1993, by the Company or any
Subsidiary in a sale-and-leaseback transaction so long as the proceeds
of such sale are applied within five Business Days to permanently
reduce Indebtedness of a Restricted Subsidiary or if there is no such
Indebtedness or such proceeds exceed the amount of such Indebtedness
then such proceeds or excess proceeds are reinvested in a Replacement
Assets within 360 days after such sale, lease, transfer, conveyance or
disposition;
(ii) (x) swap or exchange assets or property with a Cable Controlled
Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise
dispose of equity securities of any of the Company's Subsidiaries to a
Cable Controlled Subsidiary, in each
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of cases (x) and (y) so long as (A) the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company after such transaction is
equal to or less than the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such transaction; provided,
however, that if the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such transaction is 6:1 or
less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of
the Company may be 0.5 greater than such ratio immediately preceding
such transaction and (B) either (I) the assets so contributed consist
solely of a license to operate a Cable Business and the Net Households
covered by all of the licenses to operate cable and telephone systems
held by the Company and its Restricted Subsidiaries immediately after
and giving effect to such transaction equals or exceeds the number of
Net Households covered by all of the licenses to operate cable and
telephone systems held by the Company and its Restricted Subsidiaries
immediately prior to such transaction or (II) the assets so contributed
consist solely of Cable Assets and the value of the Capital Stock
received, immediately after and giving effect to such transaction, as
determined by an investment banking firm of recognized standing with
knowledge of the Cable Business, equals or exceeds the value of Cable
Assets exchanged for such Capital Stock; or
(iii) issue, sell, lease, transfer, convey or otherwise dispose of Equity
Interests (other than Disqualified Stock) of the Company (or any
Capital Stock Sale Proceeds therefrom) to any Person (including
Non-Restricted Subsidiaries).
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or amend any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that could have been
obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and
(b) the Company delivers to the Trustee:
(i) with respect to any Affiliate Transaction involving aggregate payments
in excess of $1.0 million or any series of Affiliate Transactions with
an Affiliate involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's
Certificate certifying that such Affiliate Transaction complies with
Section 4.11 (a) and such Affiliate Transaction is approved by a
majority of the disinterested directors on the Board of Directors; and
(ii) with respect to any Affiliate Transaction or any series of Affiliate
Transactions involving aggregate payments in excess of $25.0 million,
an opinion as to the fairness to the Company or such Subsidiary from a
financial point of view issued by an investment banking firm of
national standing with high yield experience together with an Officer's
Certificate to the effect that such opinion complies with this clause
(ii); provided, however, that notwithstanding the foregoing provisions,
the following shall not be deemed to be Affiliate Transactions:
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(1) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or its predecessor or such Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) transactions permitted by the provisions of Section 4.09 hereof;
(4) Liens permitted under Section 4.07 hereof which are granted by the
Company or any of its Subsidiaries to an unrelated Person for the
benefit of the Company or any other Subsidiary of the Company;
(5) any transaction pursuant to an agreement in effect on the Issuance
Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary where such
Indebtedness is owed to the holders of the Equity Interests of such
Restricted Subsidiary on a pro rata basis and on substantially
identical principal financial terms;
(7) management, operating, service or interconnect agreements entered into
in the ordinary course of business with any Cable Business in which the
Company or any Restricted Subsidiary has an Investment and which is not
a Cable Controlled Subsidiary (and of which no Affiliate of the Company
is an Affiliate other than as a result of such Investment); and
(8) any tax sharing agreement.
SECTION 4.12 DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Company or any
of its Subsidiaries (A) on its Capital Stock or (B) with respect to any
other interest or participation in, or measured by, its profits, or
(ii) pay any indebtedness owed to the Company or any of its
Subsidiaries, or
(b) make loans or advances to the Company or any of its Subsidiaries, or
(c) transfer any of its properties or assets to the Company or any of its
Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of:
(i) Existing Indebtedness as in effect on the Issuance Date;
(ii) this Indenture, the Notes, the indentures relating to the 2006 Notes
and the 2009 Notes, the 2006 Notes and the 2009 Notes;
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(iii) any agreement covering or relating to Indebtedness permitted to be
incurred under Section 4.08(b)(i), (ii), (iii), (iv), (v), (viii) or
(ix) hereof (but only, in the case of Section 4.08(b)(viii) or (ix), to
the extent contemplated by the then-existing Credit Facility), provided
that the provisions of such agreement permit any action referred to in
clause (a) above in aggregate amounts sufficient to enable the payment
of interest and principal and mandatory repurchases pursuant to the
terms of this Indenture and the Notes, but provided further that: (x)
any such agreement may nevertheless encumber, prohibit or restrict any
action referred to in clause (a) above if an event of default under
such agreement has occurred and is continuing or would occur as a
result of any such action; and (y) any such agreement may nevertheless
contain (I) restrictions limiting the payment of dividends or the
making of any other distributions to all or a portion of excess
cash-flow (or any similar formulation thereof) and (II) subordination
provisions governing Indebtedness owed to the Company or any Restricted
Subsidiary;
(iv) applicable law;
(v) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was
incurred in connection with such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets
of the Person, so acquired; provided that the EBITDA of such Person is
not taken into account in determining whether such acquisition was
permitted by the terms of this Indenture;
(vi) customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(vii) provisions of joint venture or stockholder agreements, so long as such
provisions are determined by a resolution of the Board of Directors to
be, at the time of such determination, customary for such agreements;
(viii) with respect to clause (c) above, purchase money obligations for
property acquired in the ordinary course of business or the provisions
of any agreement with respect to any Asset Sale (or transaction which,
but for its size, would be an Asset Sale), solely with respect to the
assets being sold; or
(ix) permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Refinancing Indebtedness are
determined by a resolution of the Board of Directors to be no more
restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
SECTION 4.13 CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control Triggering Event, each
Holder of Notes shall have the right to require the Company to
repurchase all or any part (equal to euro1,000 or an integral multiple
thereof) of such Holder's Notes pursuant to the offer described in
Section 3.09 hereof (the "PURCHASE OFFER") at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase (the "CHANGE OF CONTROL
PAYMENT").
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(b) Within 40 days following any Change of Control Triggering Event, the
Company shall mail to each Holder the notice provided by Section
3.09(e) and if and so long as the Notes are listed on the Luxembourg
Stock Exchange publish a notice in one leading newspaper with
circulation in Luxembourg.
SECTION 4.14 PAYMENT OF ADDITIONAL AMOUNTS.
At least 10 days prior to the first date on which payment of principal
and any premium or interest on the Notes is to be made, and at least 10 days
prior to any subsequent such date if there has been any change with respect to
the matters set forth in the Officer's Certificate described in this Section
4.14, the Company shall furnish the Trustee and the Paying Agent, if other than
the Trustee, with an Officer's Certificate instructing the Trustee and the
Paying Agent whether the Company is obligated to pay Additional Amounts (as
defined in Section 3 of the Initial Notes or Section 2 of the Exchange Notes)
with respect to such payment of principal, or of any premium or interest on the
Notes. If the Company will be obligated to pay Additional Amounts with respect
to such payment, then such Officer's Certificate shall specify by country the
amount, if any, required to be withheld on such payments to such Holders and the
Company will pay to the Trustee or the Paying Agent such Additional Amounts. The
Company shall indemnify the Trustee and the Paying Agent for, and hold them
harmless against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officer's Certificate
furnished to them pursuant to this Section 4.14.
Whenever in this Indenture there is mentioned, in any context, the
payment of principal (and premium, if any), Offer Amount, interest or any other
amount payable under or with respect to any Note such mention shall be deemed to
include mention of the payment of Additional Amounts provided for in this
Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange
Notes) to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to the provisions of this Section
4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and
express mention of the payment of Additional Amounts (if applicable) in any
provisions hereof shall not be construed as excluding Additional Amounts in
those provisions hereof where such express mention is not made (if applicable).
ARTICLE V.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another corporation, Person or
entity unless:
(a) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or
of the United States, any state thereof or the District of Columbia;
(b) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which
such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the Obligations (including the
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due and punctual payment of Additional Amounts if the surviving
corporation is a corporation organized or existing under the laws of
the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands) of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the
Notes and this Indenture;
(c) immediately after such transaction no Default or Event of Default
exists;
(d) the Company or any entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made will have a
ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less
than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company immediately preceding the transaction; provided, however, that
if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company immediately preceding such transaction is 6:1 or less, then the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may
be 0.5 greater than such ratio immediately preceding such transaction;
and
(e) such transaction would not result in the loss of any material
authorization or Material License of the Company or its Subsidiaries.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company herein; provided, however, that
the predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Notes.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest (and Additional
Amounts, if applicable) on any Note when the same becomes due and
payable and the Default continues for a period of 30 days after the
date due and payable;
(b) the Company defaults in the payment of the principal of any Note when
the same becomes due and payable, upon redemption or otherwise;
(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.08, 4.09, or 4.13 hereof;
(d) the Company fails to observe or perform any other covenant or agreement
contained in this Indenture or the Notes, required by any of them to be
performed and the Default continues for a period of 60 days after
notice from the Trustee to the Company or from the Holders of 25% in
aggregate principal amount of the then outstanding Notes to the Company
and the Trustee stating that such notice is a "Notice of Default";
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(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Restricted
Subsidiary (or the payment of which is guaranteed by the Company or any
Restricted Subsidiary), whether such Indebtedness or guarantee now
exists or is created after the Issuance Date, which default:
(i) is caused by a failure to pay when due principal of or interest on such
Indebtedness within the grace period provided for in such Indebtedness
(which failure continues beyond any applicable grace period) (a
"PAYMENT DEFAULT"); or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there is a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(f) a final judgment or final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) for
the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any Restricted Subsidiary of the
Company which remains undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the
aggregate of all such judgments exceeds $5.0 million;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case in which it is the debtor;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) generally is unable to pay its debts as the same become due;
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any Material Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any Material Subsidiary or for
all or substantially all of its property; or
(iii) orders the liquidation of the Company or any Material Subsidiary, and
the order or decree remains unstayed and in effect for 60 days; and
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(i) the revocation of a Material License.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors or the
protection of creditors. The term "CUSTODIAN" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (g) and (h) of Section 6.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes by notice to the Company and the Trustee,
may declare all the Notes to be due and payable. Upon such declaration, the
principal of, premium, if any, and interest on, the Notes shall be due and
payable immediately. If an Event of Default specified in clause (g) or (h) of
Section 6.01 hereof occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in principal amount of the
then outstanding Notes by notice to the Trustee may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. In the case of any Event of Default pursuant to the provisions of
Section 6.01 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have had to pay if the Company then had
elected to redeem the Notes pursuant to Section 7 of the Initial Notes (Section
6 in the case of the Exchange Notes), an equivalent premium shall, upon demand
of the Holders of at least 25% in principal amount of the then outstanding Notes
delivered to the Company and the Trustee, also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or in the
Notes contained to the contrary notwithstanding. If an Event of Default occurs
prior to November 15, 2004, by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to November 15, 2004, pursuant to
Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes),
then the premium payable for purposes of this paragraph for each of the years
beginning on November 15 of the years (November 24 in the case of 1999) set
forth below shall, subject to the foregoing demand, be as set forth in the
following table expressed as a percentage of the amount that would otherwise be
due pursuant to this Section 6.02 hereof but for the provisions of this
sentence.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
1999.......................................... 109.875%
2000.......................................... 108.888%
2001.......................................... 107.900%
2002.......................................... 106.913%
2003.......................................... 105.925%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
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<PAGE> 49
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then outstanding
Notes by notice to the Trustee may waive an existing Default or Event of Default
and its consequences except a continuing Default or Event of Default in the
payment of the principal of, or interest on any Note. When a Default or Event of
Default is waived, it is cured and ceases; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, is unduly prejudicial to the rights of other Holders, or
would involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee notice of a continuing Event of
Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder made pursuant to this
Section.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid on the Notes and interest on overdue principal and
interest and such further amount as shall be sufficient to cover the costs and,
to the extent lawful,
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expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest (and Additional Amounts, if applicable), ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders made pursuant to this Section.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE VII.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the Trustee
need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the
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Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and
to confirm the correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect
of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be
liable for any error of judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts and (iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money
held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officer's Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee shall not be charged with knowledge of any Event of Default
under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b)
if the Trustee does not act as Paying Agent) of Section 6.01 or of the
identity of any Material Subsidiary referred to in clause (ii) of the
definition thereof unless either (1) a Trust Officer of the Trustee
assigned to its Corporate Trustee Administration Department shall have
actual knowledge thereof, or (2) the Trustee shall have received notice
thereof in accordance with Section 10.02 hereof from the Company or any
Holder.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not
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Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Notes other
than its authentication or for compliance by the Company with the Registration
Rights Agreement.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 10.10, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it. Such disbursements and expenses
may include the reasonable disbursements, compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h)
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occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
All amounts owing to the Trustee under this Section shall be payable by
the Company in United States dollars.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08 hereof, the Company's obligations under Section 7.07 hereof
shall continue for the benefit of the retiring trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
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SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall always have a
combined capital and surplus as stated in Section 10.11 hereof. The Trustee is
subject to TIA Section 310(b). The following indentures shall be deemed to be
specifically described herein for the purposes of clause (i) of the first
proviso contained in TIA Section 310(b): (a) indenture, dated as of April 20,
1995, between the Company and The Chase Manhattan Bank, as trustee, relating to
the 12 3/4% Notes, as amended, (b) indenture, dated as of January 30, 1996,
between the Company and The Chase Manhattan Bank, as trustee, relating to the 11
1/2% Deferred Coupon Notes, as amended, (c) indenture, dated as February 12,
1997, between the Company and The Chase Manhattan Bank, as trustee, relating to
the 10% Notes, as amended, (d) indenture dated as of March 13, 1998, between the
Company and The Chase Manhattan Bank, as trustee, relating to the Company's 9
1/2% Notes, (e) indenture, dated as of March 13, 1998, between the Company and
The Chase Manhattan Bank, as trustee, relating to the Company's 10 3/4% Notes,
(f) indenture, dated as of March 13, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to Company's the 9 3/4% Notes, (g)
indenture, dated as of November 2, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to the Company's 11 1/2% Notes, (h)
indenture dated as of November 6, 1998 between the Company and The Chase
Manhattan Bank, as Trustee, relating to the 12 3/8% Deferred Coupon Notes, (i)
indenture dated as of April 14, 1999 between the Company and The Chase Manhattan
Bank, as Trustee, relating to the Company's 1999 9 3/4 Notes, (j) indenture
dated as of November 24, 1999 between the Company and The Chase Manhattan Bank,
as Trustee, relating to the Company's 2006 Notes, and (k) indenture dated as of
November 24, 1999 between the Company and The Chase Manhattan Bank, as Trustee,
relating to the Company's 2009 Notes.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE VIII.
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
SECTION 8.02 OPTION TO EFFECT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officer's Certificate, at any time, elect to have
this Section 8.02 be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Section. Upon the Company's election to have
this Section 8.02 apply to all the outstanding Notes, the Company shall, subject
to the satisfaction of the conditions set forth in the next paragraph, be deemed
to have been discharged from its obligations
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with respect to all outstanding Notes on the date such conditions are satisfied
(hereinafter, "DEFEASANCE"). For this purpose, Defeasance means that the Company
shall be deemed to have paid and discharged the entire Obligations represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.03 hereof and the other Sections of this
Indenture referred to in clauses (a) and (b) below, and to have satisfied all
its other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in the
following paragraph, payments in respect of the principal of and interest on
such Notes when such payments are due; (ii) the Company's obligations with
respect to such Notes under Article II hereof; (iii) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith; and (iv) this Article VIII.
In order to exercise Defeasance:
(a) the Company must irrevocably deposit or cause to be deposited with the
Trustee or the Paying Agent, at any time prior to the maturity date of
the Notes, in trust, for the benefit of the Holders, pursuant to an
irrevocable trust and security agreement in form satisfactory to the
Trustee, as trust funds in trust, legal tender in the countries
constituting the European Monetary Union sufficient, EEA Government
Obligations, the principal of an interest on which will be sufficient,
or a combination thereof sufficient, in the opinion of a nationally
recognized firm of independent public accountants, expressed in a
written certification thereof (in form satisfactory to the Trustee) to
pay the principal of, premium, if any, and interest, if any, on the
outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal or
installment of principal of, premium, if any, and interest, if any, on
the outstanding Notes;
(b) the Company shall have delivered to the Trustee, an Opinion of Counsel
(which counsel may be an employee of the Company) reasonably acceptable
to the Trustee confirming that: (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the Issuance Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Defeasance had not
occurred;
(c) no Event of Default shall have occurred and be continuing on the date
of such Defeasance (other than an Event of Default resulting from or
related to the incurrence of Indebtedness, the proceeds of which are to
be applied to such deposit) or, insofar as Sections 6.01(g) and (h)
hereof are concerned, at any time in the period ending on the 91st day
after the date of deposit (or greater period of time in which any such
deposit of trust funds may remain subject to the effect of any
Bankruptcy Law insofar as those apply to the deposit by the Company);
(d) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument (other
than this Indenture) to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;
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(e) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit (or
such greater period referred to in (c) above), the trust funds will not be
subject to the effect of any applicable Bankruptcy Law;
(f) the Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over any other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(g) the deposit shall not result in the Company, the Trustee or
the trust fund established pursuant to (a) above being subject to
regulation under the Investment Company Act of 1940, as amended;
(h) Holders of the Notes will have a valid, perfected and
unavoidable (under applicable Bankruptcy Law), subject to the passage of
time referred to clause (e) above, first priority security interest in the
trust funds; and
(i) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (subject to customary exceptions),
each stating that all conditions precedent provided for or relating to the
Defeasance have been complied with.
SECTION 8.03 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust, money (in the form of legal tender in the
countries constituting the European Monetary Union) or EEA Government
Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply
the deposited money (in the form of legal tender in the countries constituting
the European Monetary Union) and the money from EEA Government Obligations
through the Paying Agent and in accordance with this Indenture to the payment of
principal and interest, if any, on the Notes.
SECTION 8.04 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request any
money held by them for the payment of principal or interest that remains
unclaimed for two years after the date upon which such payment shall have become
due; provided, however, that the Company shall have first caused notice of such
payment to the Company to be mailed to each Holder entitled thereto no less than
30 days prior to such payment. After payment to the Company, the Trustee and the
Paying Agent shall have no further liability with respect to such money and
Holders entitled to the money must look to the Company for payment as general
creditors unless any applicable abandoned property law designates another
Person.
SECTION 8.05 REINSTATEMENT.
If (i) the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.03 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application and (ii) the Holders of at least a majority in principal amount
of the then outstanding Notes so request by written notice to the Trustee, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 hereof
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.03 hereof or such request is revoked by such
Holders; provided, however, that if the Company makes any payment of interest on
or principal of any Note following the reinstatement of
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its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 5.01 hereof;
(c) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(d) to make any change that does not adversely affect the
interests hereunder of any Holder;
(e) to qualify the Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification
of the Indenture under the TIA; or
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture.
SECTION 9.02 WITH CONSENT OF HOLDERS.
Subject to Section 6.07 hereof, the Company and the Trustee may amend
or supplement this Indenture or the Notes with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
principal amount of the Notes then outstanding (including Additional Notes, if
any) may also waive compliance in a particular instance by the Company with any
provision of this Indenture or the Notes. However, without the consent of each
Holder affected, an amendment, supplement or waiver under this Section may not:
(a) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter the provisions of Sections 7 and 8 of the
Initial Note and Sections 6 and 7 of the Exchange Note (other
than provisions relating to the covenants described under
Sections 4.10 and 4.13);
(c) reduce the rate of or change the time for payment of interest
on any Note;
(d) waive a default in the payment of the principal of, or
interest, if any, on, any Note (except a rescission of
acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such
acceleration);
(e) except as contemplated by Section 10.07(e), make any Note
payable in money other than that stated in the Note;
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(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption payment with respect to any Note; or
(h) make any change in the foregoing amendment and waiver
provisions of this Article 9.
To secure a consent of the Holders under this Section 9.02, it shall
not be necessary for the Holders to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Holders a notice briefly describing the
amendment or waiver.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his Note or portion of a Note if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officer's Certificate
certifying that the Holders of the requisite principal amount of Notes have
consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Notes required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Holder, unless it is of the type described in any of clauses (a)
through (h) of Section 9.02 hereof. In such case, the amendment or waiver shall
bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Note.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make such notation on a Note or to issue a new Note as
aforesaid shall not affect the validity and effect of such amendment or waiver.
53
<PAGE> 59
SECTION 9.06 TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee may, but need not, sign any supplemental indenture that adversely
affects its rights.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be incorporated into this Indenture (or, prior to the registration
of the Notes pursuant to the Registration Rights Agreement, would be required to
be incorporated into this Indenture if it were qualified under the TIA), and
shall, to the extent applicable, be governed by such provisions. If any
provision of this Indenture limits, qualifies, or conflicts with another
provision which is required (or would be so required) to be incorporated in this
Indenture by the TIA, the incorporated provision shall control.
SECTION 10.02 NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail to the other's address stated in Section 10.10 hereof. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first class
mail to his address shown on the register kept by the Registrar. Failure to mail
a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officer's Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been
complied with; and
54
<PAGE> 60
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied
with.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 4.03)
shall include:
(a) a statement that the Person signing such certificate or
rendering such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, such Person
has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting of,
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07 LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York, USA or London, United Kingdom are not
required to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If any other
operative date for purposes of this Indenture shall occur on a Legal Holiday
then for all purposes the next succeeding day that is not a Legal Holiday shall
be such operative date.
SECTION 10.08 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the Notes
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
SECTION 10.09 COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 10.10 VARIABLE PROVISIONS.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
55
<PAGE> 61
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ended on December 31, 1999.
The reporting date for Section 7.06 hereof is March 15, of each year.
The first reporting date is March 15, 2000.
The Trustee shall always have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention: Richard J. Lubasch, Esq.
Executive Vice President,
General Counsel and Secretary
The Trustee's address is:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Capital Markets Fiduciary Services
SECTION 10.11 GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE
AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 10.12 RIGHTS OF THE REGISTRAR AND PAYING AGENT.
In acting as Registrar or Paying Agent hereunder, The Chase Manhattan
Bank (London) and Chase Manhattan Bank Luxembourg S.A. shall have the benefits
and protections afforded to the Trustee hereunder, including those afforded
under Article VII and Sections 10.04 and 10.05 (except to the extent that such
benefits and protections are made expressly inapplicable to the Registrar or the
Paying Agent).
SECTION 10.13 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.14 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 10.15 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
56
<PAGE> 62
SECTION 10.16 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
57
<PAGE> 63
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
NTL COMMUNICATIONS CORP.
By: /s/ Richard J. Lubasch
------------------------------
Name: Richard J. Lubasch
Title: Executive Vice President,
General Counsel and
Secretary
Indenture signature page
<PAGE> 64
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Robert S. Peschler
---------------------------------
Name: Robert S. Peschler
Title: Assistant Vice President
Indenture signature page
<PAGE> 65
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") [,/OR] EUROCLEAR
SYSTEM ("EUROCLEAR"), OR CEDELBANK, S.A. ("CEDELBANK")1 TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR [OR
CEDELBANK] (AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR
[OR CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CHASE
NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC [,/OR] EUROCLEAR [OR CEDELBANK] OR TO
CUSTODIANS THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [,/OR] EUROCLEAR
[OR CEDELBANK] OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR
NOMINEES THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Rule 144A Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
[Regulation S Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
__________________________
1 Reference to Cedelbank should only be included in the Regulation S
Global Note.
A-1
<PAGE> 66
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN
OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES.
A-2
<PAGE> 67
No. ________
Euro ________
CINS No.[ ] /ISIN No. [ ] /CUSIP No. [__]
90% SENIOR NOTE DUE 2009
NTL Communications Corp., a Delaware corporation (the "COMPANY"),
promises to pay to __________________________ or registered assigns, the
principal sum of ____________________ euro[________] [,or such other amount
as is indicated on Schedule A hereof*,] on November 15, 2009, subject to the
further provisions of this Note set forth on the reverse hereof which further
provisions shall for all purposes have the same effect as if set forth at this
place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2000
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: _______________________
NTL COMMUNICATIONS CORP.
by: __________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 90% Senior Notes due 2009 described in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:______________________________________
Authorized Officer
_____________________
* Applicable to Global Notes Only
A-3
<PAGE> 68
[FORM OF REVERSE OF INITIAL NOTE]
NTL COMMUNICATIONS CORP.
9O% Senior Note due 2009
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 90% Senior Notes due November 15, 2009 (the
"NOTES"). The Company promises to pay interest on the Notes in cash semiannually
on each May 15 and November 15, commencing on May 15, 2000, to Holders of record
on the immediately preceding May 1 and November 1, respectively, at the rate of
90% per annum. Interest on the Notes will accrue from the most recent date
to which interest has been paid on the Notes, or if no interest has been paid,
from November 24, 1999. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, at the interest rate borne by the Notes, compounded
semiannually, and it shall pay interest on overdue installments of interest
(without regard to any applicable grace period) at the same interest rate
compounded semiannually. Any interest paid on this Note shall be increased to
the extent necessary to pay Additional Amounts as set forth in this Note.
2. Special Interest. The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement relating to the Notes (the
"REGISTRATION RIGHTS AGREEMENT").
In the event that either (a) we fail to file the Exchange Registration
Statement or the Shelf Registration Statement (as such terms are defined in the
Registration Rights Agreement) on or before the date specified for such filing
in the Registration Rights Agreement, (b) the Exchange Registration Statement is
not declared effective within 270 days after the closing of the sale of the
Notes or the Shelf Registration Statement is not declared effective within 270
days from the date such Shelf Registration Statement is filed, (c) we fail to
complete the Exchange Offer within the specified time frame, or (d) the Exchange
Registration Statement or the Shelf Registration Statement is filed and declared
effective but is thereafter either withdrawn or becomes subject to an effective
stop order suspending the effectiveness (except as specifically permitted in the
Registration Rights Agreement) without being succeeded immediately by an
additional registration statement which becomes effective, then we will pay
special interest pursuant to provisions of the Registration Rights Agreement and
the Notes to each holder of the Notes. Special interest will accrue from (i) the
date specified for such filing, in the case of clause (a) above, (ii) the date
specified for effectiveness in the case of clause (b) above, (iii) the date
specified for completion of the Exchange Offer, in the case of clause (c) above,
or (iv) the date such Exchange Offer Registration Statement or Shelf
Registration Statement ceases to be effective, in the case of clause (d) above
(each such period referred to in clauses (i) through (iv) above an "Accrual
Period"), at a rate per annum equal to 0.25% for the first 90 days of the
Accrual Period; 0.50% for the second 90 days of the Accrual Period; 0.75% for
the third 90 days of the Accrual Period and 1.0% for the remaining portion of
the Accrual Period of the principal amount of the Notes, determined daily. In
each case such additional interest will be payable in cash semiannually in
arrears on each November 15 and May 15, commencing May 15, 2000, to Holders of
record on the immediately preceding May 1 and November 1, respectively.
3. Additional Amounts. This Section 3 shall apply only in the event
that the Company becomes, or a successor to the Company is, a corporation
organized or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law. If any deduction or
withholding for or on account of any present or future taxes, assessments or
other governmental charges of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands (or any political
subdivision or taxing authority thereof or therein) shall at any
A-4
<PAGE> 69
time be required in respect of any amounts to be paid by the Company under this
Note, the Company shall pay or cause to be paid such additional amounts
("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts
received by a Holder of this Note after such deduction or withholding shall be
not less than the amounts specified in this Note to which the Holder of this
Note is entitled; provided, however, that the Company shall not be required to
make any payment of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the
extent such tax, assessment or other governmental charge would not have
been imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, nominee, trust, partnership
or corporation), other than the holding of this Note or the receipt of
amounts payable in respect of this Note, and the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands
(or any political subdivision or taxing authority thereof or therein)
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged
in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of this Note (where
presentation is required) for payment on a date more than 30 days after
the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later,
except to the extent that the Holder would have been entitled to
Additional Amounts had this Note been presented on the last day of such
period of 30 days;
(b) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure to comply by the Holder of
this Note or, if different, the beneficial owner of the interest
payable on this Note, with a timely request of the Company addressed to
such Holder or beneficial owner to provide information, documents or
other evidence concerning the nationality, residence, identity or
connection with the taxing jurisdiction of such Holder or beneficial
owner which is required or imposed by a statute, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or governmental
charge;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which
is collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or
exchange of a Note;
(e) any tax, assessment or other governmental charge
required to be withheld by any Paying Agent from any payment of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a Note, if such payment can be made, and is in
fact made, without such withholding by any other Paying Agent located
inside the United States;
(f) any tax, assessment or other governmental charge imposed
on a Holder that is not the beneficial owner of a Note to the extent
that the beneficial owner would not have been entitled to the payment
of any such Additional Amounts had the beneficial owner directly held
the Note;
(g) any combination of items (a), (b), (c), (d), (e) and
(f) above;
A-5
<PAGE> 70
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 3.
4. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments. The Company will pay principal, premium, if any,
and interest in money of the European Monetary Union that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal, premium, if any, and interest by check payable in such money.
It may mail an interest check to a holder's registered address. If a Holder so
requests, principal, premium, if any, and interest may be paid by wire transfer
of immediately available funds to an account previously specified in writing by
such Holder to the Company and the Trustee.
5. Paying Agent and Registrar. The Chase Manhattan Bank (London) will
act as Paying Agent and Registrar in London. The Trustee will act as Paying
Agent and Registrar in the City of New York, New York. Chase Manhattan Bank
Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as
long as the Notes are listed on the Luxembourg Stock Exchange. The Company may
change any Paying Agent or Registrar without prior notice. The Company or any of
its Affiliates may act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated
as of November 24, 1999 (the "INDENTURE"), between the Company and The Chase
Manhattan Bank, as Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to, and qualified by, all such terms, certain
of which are summarized hereon, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes initially issued by the
Company on the date of the Indenture are unsecured general obligations of the
Company limited to euro350,000,000 in aggregate principal amount. Additional
Notes may be issued in accordance with the terms of the Indenture.
7. Optional Redemption. Except as provided in Section 8 hereof, the
Notes are not redeemable at the Company's option prior to November 15, 2004.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
November 15 of the years indicated below:
<TABLE>
<S> <C>
Year Percentage
---- ----------
2004..................................... 104.938%
2005..................................... 103.292%
2006..................................... 101.646%
2007 and thereafter...................... 100.000%
</TABLE>
A-6
<PAGE> 71
8. Optional Tax Redemption. (a) The Notes may be redeemed at the option
of the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption if
after the date on which Section 3 of this Note becomes applicable (the "RELEVANT
DATE") there has occurred any change in or amendment to the laws (or any
regulations or official rulings promulgated thereunder) of the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any
political subdivision or taxing authority thereof or therein), or any change in
or amendment to the official application or interpretation of such laws,
regulation or rulings (a "CHANGE IN TAX LAW") which becomes effective after the
Relevant Date, as a result of which the Company is or would be so required on
the next succeeding Interest Payment Date to pay Additional Amounts with respect
to the Notes as described under Section 3 hereof with respect to withholding
taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands (or any political subdivision or taxing authority
thereof or therein) (a "WITHHOLDING TAX") and such Withholding Tax is imposed at
a rate that exceeds the rate (if any) at which Withholding Tax was imposed on
the Relevant Date, provided, however, that (i) this paragraph shall not apply to
the extent that, at the Relevant Date it was known or would have been known had
professional advice of a nationally recognized accounting firm in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands, as the case may be, been sought, that a Change in Tax Law in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands was to occur after the Relevant Date, (ii) no such notice of redemption
may be given earlier than 90 days prior to the earliest date on which the
Company would be obliged to pay such Additional Amounts were a payment in
respect of the Notes then due, (iii) at the time such notice of redemption is
given, such obligation to pay such Additional Amount remains in effect and (iv)
the payment of such Additional Amounts cannot be avoided by the use of any
reasonable measures available to the Company.
The Notes may also be redeemed, in whole but not in part, at any time
at a redemption price equal to the principal amount thereof plus accrued and
unpaid interest to the date fixed for redemption if the Person formed after the
Relevant Date by a consolidation, amalgamation, reorganization or reconstruction
(or other similar arrangement) of the Company or the Person into which the
Company is merged after the Relevant Date or to which the Company conveys,
transfers or leases its properties and assets after the Relevant Date
substantially as an entirety (collectively, a "SUBSEQUENT CONSOLIDATION") is
required, as a consequence of such Subsequent Consolidation and as a consequence
of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands occurring after the date of such
Subsequent Consolidation to pay Additional Amounts with respect to Notes with
respect to Withholding Tax as described under Section 3 hereof and such
Withholding Tax is imposed at a rate that exceeds the rate (if any) at which
Withholding Tax was or would have been imposed on the date of such Subsequent
Consolidation, provided, however, that this paragraph shall not apply to the
extent that, at the date of such Subsequent Consolidation it was known or would
have been known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law
in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands was to occur after such date.
The Company will also pay, or make available for payment, to Holders on
the Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 3 hereof) resulting from the payment of such
Redemption Price.
9. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
the Notes to be redeemed at his address of record. The Notes in denominations
larger than euro1,000 may be redeemed in part but only in integral
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multiples of euro1,000. In the event of a redemption of less than all of the
Notes, the Notes will be chosen for redemption by the Trustee in accordance with
the Indenture. On and after the redemption date, interest ceases to accrue on
the Notes or portions of them called for redemption.
If this Note is redeemed subsequent to a record date with respect to
any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Note is registered at the close of business on such record date.
10. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
11. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date, Holders of Notes that are subject to an offer to purchase will
receive a Change of Control offer from the Company prior to any related Purchase
Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, and when the aggregate amount of Excess Proceeds from
such Asset Sales exceeds $15.0 million, the Company shall be required
to make an offer (an "ASSET SALE OFFER") to all holders of the Notes
and Other Qualified Notes to purchase the maximum principal amount of
Notes and Other Qualified Notes (determined on a pro rata basis
according to the principal amount or accreted value, as the case may
be, of the Notes and the Other Qualified Notes) that may be purchased
out of the Excess Proceeds, with respect to the Notes, at an offer
price in cash in an amount equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the date
fixed for the closing of such offer. To the extent that the aggregate
principal amount or accreted value, as the case may be, of Notes and
Other Qualified Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount or
accreted value, as the case may be, of Notes and Other Qualified Notes
surrendered by holders thereof exceeds the amount of Excess Proceeds,
then such remaining Excess Proceeds will be allocated pro rata
according to principal amount or accreted value, as the case may be, to
the Notes and each issue of the Other Qualified Notes and, the Trustee
will select the Notes to be purchased in accordance with Section
3.09(e) of the Indenture. Upon completion of such offer to purchase,
the amount of Excess Proceeds will be reset at zero.
12. Denominations, Transfer, Exchange. The Notes are in registered
form, without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption (except the unredeemed portion of any Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Note for a period of 15 days before a selection of Notes to be redeemed.
13. Persons Deemed Owners. Except as provided in paragraph 4 of this
Note, the registered Holder of a Note may be treated as its owner for all
purposes.
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14. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
15. Defaults and Remedies. The Notes shall have the Events of Default
set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all unpaid principal and interest accrued on the Notes shall become
due and payable immediately without further action or notice. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture may direct the Trustee in its
exercise of any trust or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of Default and
remedies is qualified by reference, and subject in its entirety, to the more
complete description thereof contained in the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or exchange
offer for Notes), and any existing default may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder, the Indenture or the Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to Holders, to make any change that does
not adversely affect the rights of any Holder or to qualify the Indenture under
the TIA or to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
17. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to, among other things, engage
in certain transactions with Affiliates, incur additional indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
18. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
19. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Notes.
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20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
21. Authentication. The Notes shall not be valid until authenticated by
the manual signature of an authorized officer of the Trustee or an
authenticating agent.
22. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
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<PAGE> 75
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
------------------------------------------
(Insert assignee's social security or tax I.D. no.)
------------------------------------------
------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: _____________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: * ____________________________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Notes and the last date,
if any, on which such Notes were owned by the Company or any Affiliate
of the Company, the undersigned confirms that such Notes are being
transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company or a subsidiary thereof,
(2) [ ] to a qualified institutional buyer in compliance with Rule 144A,
(3) [ ] outside the United States in compliance with Rule 903 or Rule 904
under the Securities Act,
(4) [ ] pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available) or
(5) [ ] inside the United States to an Institutional Accredited Investor
that, prior to such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Notes (the form of which letter can be
obtained from the Trustee) and, if such transfer is in respect of an
aggregate principal amount of Notes of less than euro100,000, an
opinion of counsel acceptable to the Company that such transfer is in
compliance with the Securities Act,
(6) [ ] pursuant to an effective registration statement under the
Securities Act.
______________________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
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--------------------------
Signature
Signature Guarantee*
- --------------------------
Signature must be guaranteed
- ------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Date: _____________________
__________________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
NOTICE: To be executed by an executive officer
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof
repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the
Indenture, check the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
euro1,000 or any integral multiple thereof) to be purchased: __________________
Your Signature: ______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:**/
__________________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
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<PAGE> 78
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall
be ______. The following increases or decreases in the principal amount of this
Global Note have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase Principal amount of Signature of Date of exchange
principal amount of in principal amount this Global Note authorized officer following such
this Global Note of this Global Note of Trustee or Common decrease or increase
Depositary
<S> <C> <C> <C> <C>
</TABLE>
A-14
<PAGE> 79
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE]
[Global Notes Legend, if applicable]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC")
[,/OR] EUROCLEAR SYSTEM ("EUROCLEAR"), OR CEDELBANK S.A. ("CEDELBANK")2, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR] EUROCLEAR
[OR CEDELBANK](AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR]
EUROCLEAR [OR CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CHASE NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC [OR] EUROCLEAR [OR CEDELBANK] OR TO
CUSTODIANS THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [OR] EUROCLEAR [OR
CEDELBANK] OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR
NOMINEE THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
- --------------
2 Reference to Cedelbank should only be included in the Regulation S Global
Note.
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<PAGE> 80
No. ___________ euro__________
CINS No. [ ]/ISIN No. [ ]/ CUSIP No. [ ]
9O% SERIES B SENIOR NOTE DUE 2009
NTL Communications Corp., a Delaware corporation (the "COMPANY")
promises to pay to _________________________ or registered assigns, the
principal sum of Euro[ ] [or such other amount as is indicated on Schedule A
hereof]**** on November 15, 2009, subject to the further provisions of this Note
set forth on the reverse hereof which further provisions shall for all purposes
have the same effect as if set forth at this place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2000
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: ________________
NTL COMMUNICATIONS CORP.
by:____________________________________
by:____________________________________
____________
**** Applicable to Global Notes only.
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<PAGE> 81
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 9O% Series B Senior Notes due 2009 described in the
within mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By: _____________________________________
Authorized Officer
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(FORM OF REVERSE OF EXCHANGE NOTE)
NTL COMMUNICATIONS CORP.
9O% Series B Senior Note due 2009
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 90% Series B Senior Notes due 2009 (the
"NOTES"). The Company promises to pay interest on the Notes in cash semiannually
on each May 15 and November 15, commencing on May 15, 2000, to Holders of record
on the immediately preceding May 1 and November 1, respectively, at the rate of
9O% per annum. Interest on the Notes will accrue from the most recent date
to which interest has been paid on the Notes, or if no interest has been paid,
from November 24, 1999. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, at the interest rate borne by the Notes, compounded
semiannually, and it shall pay interest on overdue installments of interest
(without regard to any applicable grace period) at the same interest rate
compounded semiannually. Any interest paid on this Note shall be increased to
the extent necessary to pay Additional Amounts as set forth in this Note.
2. Additional Amounts. This Section 2 shall apply only in the event
that the Company becomes, or a successor to the Company is, a corporation
organized or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction of such taxes, duties, assessments or
governmental charges is then required by law. If any deduction or withholding
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing
authority thereof or taxing authority thereof or therein) shall at any time be
required in respect of any amounts to be paid by the Company under this Note,
the Company shall pay or cause to be paid such additional amounts ("ADDITIONAL
AMOUNTS") as may be necessary in order that the net amounts received by a Holder
of this Note after such deduction or withholding shall be not less than the
amounts specified in this Note to which the Holder of this Note is entitled;
provided, however, that the Company shall not be required to make any payment of
Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the
extent such tax, assessment or other governmental charge would not have
been imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, nominee, trust, partnership
or corporation), other than the holding of this Note or the receipt of
amounts payable in respect of this Note, the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or
any political subdivision or taxing authority thereof or therein,
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged
in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of this Note (where
presentation is required) for payment on a date more than 30 days after
the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later,
except to the extent that the Holder would have been entitled to
Additional Amounts had this Note been presented on the last day of such
period of 30 days;
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<PAGE> 83
(b) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure to comply by the Holder of
this Note or, if different, the beneficial owner of the interest
payable on this Note, with a timely request of the Company addressed to
such Holder or beneficial owner to provide information, documents or
other evidence concerning the nationality, residence, identity or
connection with the taxing jurisdiction of such Holder or beneficial
owner which is required or imposed by a statute, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or governmental
charge;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which
is collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or
exchange of a Note;
(e) any tax, assessment or other governmental charge
required to be withheld by any Paying Agent from any payment of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a Note, if such payment can be made, and is in
fact made, without such withholding by any other Paying Agent located
inside the United States;
(f) any tax, assessment or other governmental charge imposed
on a Holder that is not the beneficial owner of a Note to the extent
that the beneficial owner would not have been entitled to the payment
of any such Additional Amounts had the beneficial owner directly held
the Note;
(g) any combination of items (a), (b), (c), (d), (e) and
(f) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 2.
3. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments. The Company will pay principal, premium, if any,
and interest in money of the European Monetary Union that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal, premium, if any, and interest by check payable in such money.
It may mail an interest check to a holder's registered address. If a Holder so
requests, principal, premium, if any, and interest may be paid by wire transfer
of immediately available funds to an account previously specified in writing by
such Holder to the Company and the Trustee.
4. Paying Agent and Registrar. The Chase Manhattan Bank (London) will
act as Paying Agent and Registrar in London. The Trustee will act as Paying
Agent and Registrar in the City of New York. Chase Manhattan Bank Luxembourg
S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the
Notes are listed on the Luxembourg Stock Exchange. The Company may change any
Paying
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<PAGE> 84
Agent or Registrar without prior notice. The Company or any of its
Affiliates may act in any such capacity.
5. Indenture. The Company issued the Notes under an indenture, dated as
of November 24, 1999 (the "INDENTURE"), between the Company and The Chase
Manhattan Bank, as Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to, and qualified by, all such terms, certain
of which are summarized hereon, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes initially issued by the
Company on the date of the Indenture are unsecured general obligations of the
Company limited to euro350,000,000 in aggregate principal amount. Additional
Notes may be issued in accordance with the terms of the Indenture.
6. Optional Redemption. Except as provided in Section 7 herein, the
Notes are not redeemable at the Company's option prior to November 15, 2004.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
November 15 of the years indicated below:
Year Percentage
---- ----------
2004 ......................................... 104.938%
2005.......................................... 103.292%
2006.......................................... 101.646%
2007 and thereafter........................... 100.000%
7. Optional Tax Redemption. (a) The Notes may be redeemed at the option
of the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption if
after the date on which Section 2 of this Note becomes applicable (the "RELEVANT
DATE") there has occurred any change in or amendment to the laws (or any
regulations or official rulings promulgated thereunder) of the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any
political subdivision or taxing authority thereof or therein), or any change in
or amendment to the official application or interpretation of such laws,
regulations or rulings (a "CHANGE IN TAX LAW") which becomes effective after the
Relevant Date, as a result of which the Company is or would be so required on
the next succeeding Interest Payment Date to pay Additional Amounts with respect
to the Notes as described under Section 2 hereof with respect to withholding
taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands (or any political subdivision or taxing authority
thereof or therein) (a "WITHHOLDING TAX") and such Withholding Tax is imposed at
a rate that exceeds the rate (if any) at which Withholding Tax was imposed on
the Relevant Date, provided, however, that (i) this paragraph shall not apply to
the extent that, at the Relevant Date it was known or would have been known had
professional advice of a nationally recognized accounting firm in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands, as the case may be, been sought, that a change in Tax Law in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands was to occur after the Relevant Date, (ii) no such notice of redemption
may be given earlier than 90 days prior to the earliest date on which the
Company would be obliged to pay such Additional
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<PAGE> 85
Amounts were a payment in respect of the Notes then due, (iii) at the time such
notice of redemption is given, such obligation to pay such Additional Amount
remains in effect and (iv) the payment of such Additional Amounts cannot be
avoided by the use of any reasonable measures available to the Company.
(b) The Notes may also be redeemed, in whole but not in
part, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for
redemption if the Person formed after the Relevant Date by a
consolidation, amalgamation, reorganization or reconstruction (or other
similar arrangement) of the Company or the Person into which the
Company is merged after the Relevant Date or to which the Company
conveys, transfers or leases its properties and assets after the
Relevant Date substantially as an entirety (collectively, a "SUBSEQUENT
CONSOLIDATION") is required, as a consequence of such Subsequent
Consolidation and as a consequence of a Change in Tax Law in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands occurring after the date of such Subsequent
Consolidation to pay Additional Amounts with respect to Notes with
respect to Withholding Tax as described under Section 2 hereof and such
Withholding Tax is imposed at a rate that exceeds the rate (if any) at
which Withholding Tax was or would have been imposed on the date of
such Subsequent Consolidation, provided, however, that this paragraph
shall not apply to the extent that, at the date of such Subsequent
Consolidation it was known or would have been known had professional
advice of a nationally recognized accounting firm in the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the
Cayman Islands, as the case may be, been sought, that a Change in Tax
Law in the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands was to occur after such date.
The Company will also pay, or make available for payment, to Holders on
the Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 2 hereof) resulting from the payment of such
Redemption Price.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
the Notes to be redeemed at his address of record. The Notes in denominations
larger than euro1,000 may be redeemed in part but only in integral multiples of
euro1,000. In the event of a redemption of less than all of the Notes, the
Notes will be chosen for redemption by the Trustee in accordance with the
Indenture. On and after the redemption date, interest ceases to accrue on the
Notes or portions of them called for redemption. If this Note is redeemed
subsequent to a record date with respect to any interest payment date specified
above and on or prior to such interest payment date, then any accrued interest
will be paid to the Person in whose name this Note is registered at the close of
business on such record date.
9. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
10. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date. Holders of Notes that are subject to an offer to purchase will
receive a Change of Control offer from the Company prior to any related Purchase
Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, and when the aggregate amount of Excess Proceeds from
such Asset Sales exceeds $15.0 million, the Company shall be required
to make an offer (an "ASSET SALE OFFER") to all holders of the Notes
B-7
<PAGE> 86
and Other Qualified Notes to purchase the maximum principal amount of
Notes and other Qualified Notes (determined on a pro rata basis
according to the principal amount or accreted value, as the case may
be, of the Notes and the Other Qualified Notes) that may be purchased
out of the Excess Proceeds with respect to the Notes, at an offer price
in cash in an amount equal to 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer. To the extent that the aggregate principal
amount or accreted value, as the case may be, of Notes and Other
Qualified Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use such deficiency for general
corporate purposes. If the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes
surrendered by holders thereof exceeds the amount of Excess Proceeds
then any remaining Excess Proceeds will be allocated pro rata according
to principal amount or accreted value, as the case may be, to the Notes
and each issue of the Other Qualified Notes and, the Trustee will
select the Notes to be purchased in accordance with Section 3.09(e) of
the Indenture. Upon completion of such offer to purchase, the amount of
Excess Proceeds will be reset at zero.
11. Denominations, Transfer, Exchange. The Notes are in registered
form, without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption (except the unredeemed portion of any Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Note for a period of 15 days before a selection of Notes to be redeemed.
12. Persons Deemed Owners. Except as provided in paragraph 3 of this
Note, the registered Holder of a Note may be treated as its owner for all
purposes.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
14. Defaults and Remedies. The Notes shall have the Events of Default
as set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all unpaid principal and interest accrued on the Notes shall become
due and payable immediately without further action or notice. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not enforce
the Indenture or the Notes as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes issued under the Indenture may direct the Trustee in its exercise of any
trust or power. The Company must furnish annually compliance certificates to the
Trustee. The above description of Events of Default and remedies is qualified by
reference, and subject in its entirety, to the more complete description thereof
contained in the Indenture.
B-8
<PAGE> 87
15. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or exchange
offer for Notes), and any existing default may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder, the Indenture or the Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to Holders, to make any change that does
not adversely affect the rights of any Holder or to qualify the Indenture under
the TIA or to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
16. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to, among other things, engage
in certain transactions with Affiliates, incur additional Indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
18. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
20. Authentication. The Notes shall not be valid until authenticated by
the manual signature of an authorized officer of the Trustee or an
authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of survivorsh
ip and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts
to Minors Act).
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
Executive Vice President,
General Counsel and Secretary
B-9
<PAGE> 88
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
__________________________________________
(Insert assignee's social security or tax I.D. no.)
__________________________________________
__________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: ___________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: **/ ______________________________
____________________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
of the New York Stock Exchange.
B-10
<PAGE> 89
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased
by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check
the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
euro1,000 or any integral multiple thereof) to be purchased: __________________
Your Signature: _____________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:***
___________________________________
*** Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
B-11
<PAGE> 90
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be
euro__________________. The following increases or decreases in the principal
amount of this Global Note have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase Principal amount of Signature of Date of exchange
principal amount of in principal amount this Global Note authorized officer following such
this Global Note of this Global Note of Trustee or Common decrease or increase
Depositary
<S> <C> <C> <C> <C>
</TABLE>
B-12
<PAGE> 91
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM RULE 144A GLOBAL NOTE
TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(ii)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 9O% Senior Notes Due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee.
This letter relates to euro[ ] aggregate principal amount of Notes
which are held in the form of the [Rule 144A Global Note (CUSIP No. )] with the
Depositary in the name of [name of transferor] (the "Transferor") to effect the
transfer of the Notes in exchange for an equivalent beneficial interest in the
Regulation S Global Notes.
In connection with such request, the Transferor does hereby certify
that such transfer has been effected in accordance with the transfer
restrictions set forth in the Notes and (i) with respect to transfers made in
reliance on Regulation S, does hereby certify that:
(1) the offer of the Notes was not made to a Person in the
United States;
(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any Person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the United States Securities Act of
1933, as amended (the "Securities Act");
and (ii) with respect to transfers made in reliance on Rule 144 does hereby
certify that the Notes are being transferred in a transaction permitted by Rule
144 under the Securities Act; and (iii) with respect to transfers made in
reliance on Rule 144A, does hereby certify that such Notes are being transferred
in accordance with Rule 144A under the Securities Act to a transferee that the
Transferor reasonably believes is purchasing the Notes for its own account or an
account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
C-1
<PAGE> 92
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the
case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Capitalized terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S.
[Name of Transferor]
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President, General Counsel and Secretary
C-2
<PAGE> 93
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE
TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(iii), (iv) or (v)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Market Fiduciary Services
Re: NTL Communications Corp. 9O% Senior Notes Due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes
which are held in the form of the [Regulation S Global Note] [DTC Rule 144A
Global Note] [Euroclear Rule 144A Global Note] (CINS No. [ ]) (CUSIP No. [ ])
with the Depositary in the name of [name of transferor] (the "Transferor") to
effect the transfer of the Notes in exchange for an equivalent beneficial
interest in the Rule 144A Global Note.
In connection with such request, and in respect of such Notes the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended, to a
transferee that the Transferor reasonably believes is purchasing the Notes for
its own account or an account with respect to which the transferee exercises
sole investment discretion and the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
[Name of Transferor],
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President, General Counsel and Secretary
D-1
<PAGE> 94
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR RESTRICTED
NOTE TO RESTRICTED NOTE
(Transfers pursuant to Section 2.06(a)(vi)
or Section 2.06(a)(vii) of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 9O% Senior Notes due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications, Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes
which are held [in the form of the [Rule 144A/Regulation S] [Global]
[Restricted] Note (CINS No. [ ]/ISIN No. [ ]/CUSIP No. [ ]) with the Depositary
in the name of [name of transferor] (the "Transferor") to effect the transfer of
the Notes.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes and (ii) in
accordance with applicable securities laws of any state of the United States or
any other jurisdiction.
*Insert, if appropriate.
[Name of Transferor],
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
E-1
<PAGE> 95
EXHIBIT F
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 9O% Senior Notes due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes
which are held [in the form of the [Rule 144A/Regulation S] [Restricted]
[Global] Note (CINS No. [ ] / ISIN No. [ ]/CUSIP No.[ ]) with the Depositary* *
in the name of [name of transferor] (the "Transferor") to effect the transfer of
the Notes to the undersigned.
In connection with such request, and in respect of such Notes we
confirm that:
1. We understand that the Notes were originally offered in a
transaction not involving any public offering in the United States within the
meaning of the United States Securities Act of 1933, as amended (the "SECURITIES
ACT"), that the Notes have not been registered under the Securities Act and that
(A) the Notes may be offered, resold, pledged or otherwise transferred only (i)
to a Person who the seller reasonably believes is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, in a transaction meeting the requirements
of Rule 144 under the Securities Act, to a Person who the seller reasonably
believes is an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act), outside
the United States in a transaction meeting the requirements of Rule 903 or 904
of Regulation S under the Securities Act or in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (ii) to the Company, (iii)
pursuant to any other available exemption from registration or (iv) pursuant to
an effective registration statement, and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (B) the purchaser will, and each subsequent Holder
is required to, notify any subsequent purchaser from it of the resale
restrictions set forth in (A) above.
2. We are a corporation, partnership or other entity having such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Notes, and we are (or
any account for which we are purchasing under paragraph 4 below is) an
institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, able to bear the economic risk of our proposed
investment in the Notes.
_________________________________
*Insert and modify if appropriate
F-1
<PAGE> 96
3. We are acquiring the Notes for our own account (or for accounts as
to which we exercise sole investment discretion and have authority to make, and
do make, the statements contained in this letter) and not with a view to any
distribution of the Notes, subject, nevertheless, to the understanding that the
disposition of our property shall at all times be and remain within our control.
4. We are, and each account (if any) for which we are purchasing Notes
is, purchasing Notes having an aggregate principal amount of not less than
euro100,000 and, if such transfer is in respect of an aggregate principal
amount of Notes of less than euro100,000, we are providing an opinion of
counsel acceptable to the Company that such transfer is in compliance with the
Securities Act.
5. We understand that (a) the Notes will be delivered to us in
registered form only and that the certificate delivered to us in respect of the
Notes will bear a legend substantially to the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
and (b) such certificates will be reissued without the foregoing legend
only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish to
dispose of any of the Notes, we will not do so unless:
(a) the Notes are sold to the Company or any subsidiary
thereof;
(b) the Notes are sold to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act;
(c) the Notes are sold outside the United States in
compliance with Rule 903 or Rule 904 under the Securities Act;
(d) the Notes are sold to an Institutional Accredited
Investor in a transaction exempt from the registration requirements of
the Securities Act,
(d) the Notes are sold pursuant to an effective registration
statement under the Securities Act; or
(e) the Notes are sold pursuant to any other available
exemption from registration, subject to the requirements of the legend
set forth above.
Very truly yours,
F-2
<PAGE> 97
[PURCHASER]
By:____________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President, General Counsel and Secretary
F-3
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
- --------------------------------------------------------------------------------
NTL COMMUNICATIONS CORP.
EURO210,000,000
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
------------------------------
INDENTURE
Dated as of November 24, 1999
------------------------------
------------------------
The Chase Manhattan Bank
Trustee
------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.01 Definitions..................................................................................1
Section 1.02 Other Definitions...........................................................................13
Section 1.03 Incorporation by Reference of Trust Indenture Act...........................................14
Section 1.04 Rules of Construction.......................................................................14
ARTICLE II. THE NOTES............................................................................................15
Section 2.01 Form and Dating.............................................................................15
Section 1.02 Execution and Authentication................................................................17
Section 1.03 Registrar and Paying Agent..................................................................17
Section 1.04 Paying Agent to Hold Money in Trust.........................................................18
Section 1.05 Holder Lists................................................................................18
Section 1.06 Transfer and Exchange.......................................................................18
Section 1.07 Replacement Notes...........................................................................23
Section 1.08 Outstanding Notes...........................................................................23
Section 1.09 Treasury Notes..............................................................................23
Section 1.10 Temporary Notes; Global Notes...............................................................23
Section 1.11 Cancellation................................................................................24
Section 1.12 Defaulted Interest..........................................................................24
ARTICLE II. REDEMPTION...........................................................................................25
Section 2.01 Notices to Trustee..........................................................................25
Section 2.02 Selection of Notes to Be Redeemed...........................................................25
Section 2.03 Notice of Redemption........................................................................25
Section 2.04 Effect of Notice of Redemption..............................................................26
Section 2.05 Deposit of Redemption Price.................................................................26
Section 2.06 Notes Redeemed in Part......................................................................26
Section 2.07 Optional Redemption and Optional Tax Redemption.............................................26
Section 2.08 Mandatory Redemption........................................................................26
Section 2.09 Asset Sale Offer and Purchase Offer.........................................................26
ARTICLE III. COVENANTS...........................................................................................29
Section 3.01 Payment of Notes............................................................................29
Section 3.02 Reports.....................................................................................29
Section 3.03 Compliance Certificate......................................................................29
Section 3.04 Stay, Extension and Usury Laws..............................................................30
Section 3.05 Corporate Existence.........................................................................30
Section 3.06 Taxes.......................................................................................30
Section 3.07 Limitations on Liens........................................................................30
Section 3.08 Incurrence Of Indebtedness And Issuance Of Preferred Stock..................................31
Section 3.09 Restricted Payments.........................................................................33
Section 3.10 Asset Sales.................................................................................35
Section 3.11 Transactions with Affiliates................................................................37
Section 3.12 Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries..................38
Section 3.13 Change of Control...........................................................................40
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 3.14 Payment of Additional Amounts...............................................................40
ARTICLE IV. SUCCESSORS...........................................................................................40
Section 4.01 Merger, Consolidation or Sale of Assets.....................................................40
Section 4.02 Successor Corporation Substituted...........................................................41
ARTICLE V. DEFAULTS AND REMEDIES.................................................................................41
Section 5.01 Events of Default...........................................................................41
Section 5.02 Acceleration................................................................................43
Section 5.03 Other Remedies..............................................................................44
Section 5.04 Waiver of Past Defaults.....................................................................44
Section 5.05 Control by majority.........................................................................44
Section 5.06 Limitation on Suits.........................................................................44
Section 5.07 Rights of Holders to Receive Payment........................................................45
Section 5.08 Collection Suit by Trustee..................................................................45
Section 5.09 Trustee May File Proofs of Claim............................................................45
Section 5.10 Priorities..................................................................................45
Section 5.11 Undertaking for Costs.......................................................................45
ARTICLE VI. TRUSTEE..............................................................................................46
Section 6.01 Duties of Trustee...........................................................................46
Section 6.02 Rights of Trustee...........................................................................46
Section 6.03 Individual Rights of Trustee................................................................47
Section 6.04 Trustee's Disclaimer........................................................................47
Section 6.05 Notice of Defaults..........................................................................47
Section 6.06 Reports by Trustee to Holders...............................................................47
Section 6.07 Compensation and Indemnity..................................................................47
Section 6.08 Replacement of Trustee......................................................................48
Section 6.09 Successor Trustee by Merger, Etc............................................................49
Section 6.10 Eligibility; Disqualification...............................................................49
Section 6.11 Preferential Collection of Claims Against Company...........................................50
ARTICLE VII. DISCHARGE OF INDENTURE..............................................................................50
Section 7.01 Termination of Company's Obligations........................................................50
Section 7.02 Option to Effect Defeasance.................................................................50
Section 7.03 Application of Trust Money..................................................................51
Section 7.04 Repayment to Company........................................................................51
Section 7.05 Reinstatement...............................................................................52
ARTICLE VIII. AMENDMENTS, SUPPLEMENTS AND WAIVERS................................................................52
Section 8.01 Without Consent of Holders..................................................................52
Section 8.02 With Consent of Holders.....................................................................52
Section 8.03 Compliance with Trust Indenture Act.........................................................53
Section 8.04 Revocation and Effect of Consents...........................................................53
Section 8.05 Notation on or Exchange of Notes............................................................54
Section 8.06 Trustee Protected...........................................................................54
ARTICLE IX. MISCELLANEOUS........................................................................................54
Section 9.01 Trust Indenture Act Controls................................................................54
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
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<S> <C>
Section 9.02 Notices.....................................................................................54
Section 9.03 Communication by Holders with Other Holders.................................................55
Section 9.04 Certificate and Opinion as to Conditions Precedent..........................................55
Section 9.05 Statements Required in Certificate or Opinion...............................................55
Section 9.06 Rules by Trustee and Agents.................................................................55
Section 9.07 Legal Holidays..............................................................................55
Section 9.08 No Recourse Against Others..................................................................56
Section 9.09 Counterparts and Facsimile Signatures.......................................................56
Section 9.10 Variable Provisions.........................................................................56
Section 9.11 Governing Law...............................................................................56
Section 9.12 Rights of the Registrar and Paying Agent....................................................57
Section 9.13 No Adverse Interpretation of Other Agreements...............................................57
Section 9.14 Successors..................................................................................57
Section 9.15 Severability................................................................................57
Section 9.16 Table of Contents, Headings, Etc............................................................57
</TABLE>
iii
<PAGE> 5
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)..........................................................7.10
(a)(2).............................................................7.10
(a)(3).............................................................N.A.
(a)(4).............................................................N.A.
(a)(5).............................................................7.10
(b) .............................................................7.08
7.10
(c) ..............................................................N.A.
311(a).............................................................7.11
(b) ..............................................................7.11
(c) ..............................................................N.A.
312(a).............................................................2.05
(b) ..............................................................10.03
(c) ..............................................................10.03
313(a).............................................................7.06
(b)(1).............................................................N.A.
(b)(2).............................................................7.06
(c) ..............................................................7.06
(d) ..............................................................7.06
314(a).............................................................4.02
4.03
(b) ..............................................................N.A.
(c)(1).............................................................10.04
(c)(2).............................................................10.04
(c)(3).............................................................N.A.
(d) ..............................................................N.A.
(e) ..............................................................N.A.
(f) ..............................................................N.A.
315(a).............................................................7.01(b)
(b) ..............................................................7.05
(c) ..............................................................7.01(a)
(d) ..............................................................7.01(c)
(e) ..............................................................6.11
316(a)(last sentence)..............................................2.09
(a)(1)(A)..........................................................6.05
(a)(1)(B)..........................................................6.04
(a)(2).............................................................N.A.
(b) ..............................................................6.07
(c) ..............................................................9.04
317(a)(1)..........................................................6.08
(a)(2).............................................................6.09
(b) ..............................................................2.04
318(a).............................................................N.A.
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
iv
<PAGE> 6
INDENTURE, dated as of November 24, 1999, between NTL Communications
Corp., a Delaware corporation (the "COMPANY"), and The Chase Manhattan Bank, a
New York corporation, as trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined in Section 1.01) of the
Company's 11 1/2% Senior Deferred Coupon Notes due 2009 (the "INITIAL NOTES")
and, if and when issued in exchange for Initial Notes, the Company's 11 1/2%
Series B Senior Deferred Coupon Notes due 2009 (the "EXCHANGE NOTES" and,
together with the Initial Notes, the "NOTES"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"1999 9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon
Notes due 2009 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes
due 2009.
"2006 NOTES" means the Company's 9 1/4% Senior Notes due 2006 and the
Company's 9 1/4% Series B Senior Notes due 2006.
"2009 NOTES" means the Company's 9 7/8% Senior Notes due 2009 and the
Company's 9 7/8 % Series B Senior Notes due 2009.
"9 1/2% NOTES" means the Company's 9 1/2% Senior Notes due 2008 and the
Company's 9 1/2% Series B Senior Notes due 2008.
"9 3/4% NOTES" means the Company's 9 3/4% Senior Deferred Coupon Notes
due 2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due
2008.
"10% NOTES" means the Company's 10% Series B Senior Notes due 2007.
"10 3/4% NOTES" means the Company's 10 3/4% Senior Deferred Coupon
Notes due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes
due 2008.
"11 1/2% DEFERRED COUPON NOTES" means the Company's 11 1/2% Series B
Senior Deferred Coupon Notes due 2006.
"11 1/2% NOTES" means the Company's 11 1/2% Senior Notes due 2008 and
the Company's 11 1/2% Series B Senior Notes due 2008.
"12 3/4% NOTES" means the Company's 12 3/4% Series A Senior Deferred
Coupon Notes due 2005.
"12M% NOTES" means the Company's 12 3/8% Series B Senior Deferred
Coupon Notes due 2008.
"ACCRETED VALUE" means, as of any date of determination prior to
November 15, 2004, with respect to any Note, the sum of (a) the initial offering
price (which is euro573.33 per euro1000.00 principal amount at maturity of the
Notes) of such Note, and (b) the portion of the excess of the principal amount
of such Note over such initial offering price which shall have been accreted
thereon through such date, such amount to be so accreted on a daily basis at a
rate of 11 1/2% per annum of the initial offering price of such Note compounded
semiannually on each May 15 and November 15 from the date of issuance of the
Note through the date of determination, computed on the basis of a 360-day year
of twelve 30-day months.
<PAGE> 7
"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person (the "Acquired Person") existing at the time
such Acquired Person merged with or into or became a Subsidiary of such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such Acquired Person merging with or into or becoming a
Subsidiary of such specified Person.
"ACQUIRED PERSON" has the meaning specified in the definition of
Acquired Debt.
"ADDITIONAL NOTES" means up to euro65,000,000 in aggregate principal
amount at maturity of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same
series as the Initial Notes.
"ADJUSTED TOTAL ASSETS" means the total amount of assets of the Company
and its Restricted Subsidiaries (including the amount of any Investment in any
Non-Restricted Subsidiary), except to the extent resulting from write-ups of
assets (other than write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities of
the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as calculated in conformity with GAAP. For purposes of this
Adjusted Total Assets definition, (a) assets shall be calculated less applicable
accumulated depreciation, accumulated amortization and other valuation reserves,
and (b) all calculations shall exclude all intercompany items.
"ADJUSTED TOTAL CONTROLLED ASSETS" means the total amount of assets of
the Company and its Cable Controlled Subsidiaries, except to the extent
resulting from write-ups of assets (other than write-ups in connection with
accounting for acquisitions in conformity with GAAP), after deducting therefrom
(i) all current liabilities of the Company and such Cable Controlled
Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles of the Company
and such Restricted Subsidiaries, all as calculated in conformity with GAAP;
provided that Adjusted Total Controlled Assets shall be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal to the
aggregate amount of all Investments of the Company or any such Cable Controlled
Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash
Equivalents. For purposes of this Adjusted Total Controlled Assets definition,
(a) assets shall be calculated less applicable accumulated depreciation,
accumulated amortization and other valuation reserves, and (b) all calculations
shall exclude all intercompany items.
"AFFILIATE" of any specified Person means any other Person directly
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Registrar or Paying Agent.
"ANNUALIZED PRO FORMA EBITDA" means, with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"ASSET SALE" means (i) any sale, lease, transfer, conveyance or other
disposition of any assets (including by way of a sale-and-leaseback) other than
the sale or transfer of inventory or goods held for sale in the ordinary course
of business (provided that the sale, lease, transfer, conveyance or other
2
<PAGE> 8
disposition of all or substantially all of the assets of the Company shall be
governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease,
transfer, conveyance or other disposition of any Equity Interests of any of the
Company's Restricted Subsidiaries to any Person; in either case other than (A)
to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which
is a Subsidiary of the Company on the Issuance Date provided that at the time of
and after giving effect to such issuance, sale, lease, transfer, conveyance or
other disposition to such Subsidiary, the Company's ownership percentage in such
Subsidiary is equal to or greater than such percentage on the Issuance Date or
(B) the issuance, sale, transfer, conveyance or other disposition of Equity
Interests of a Subsidiary in exchange for capital contributions made on a pro
rata basis by the holders of the Equity Interests of such Subsidiary.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CABLE ASSETS" means tangible or intangible assets, licenses
(including, without limitation, Licenses) and computer software used in
connection with a Cable Business.
"CABLE BUSINESS" means (i) any Person directly or indirectly operating,
or owning a license to operate, a cable and/or television and/or telephone
and/or telecommunications system or service principally within the United
Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business.
"CABLE CONTROLLED PROPERTY" means a Cable Controlled Subsidiary or a
Cable Asset held by a Cable Controlled Subsidiary.
"CABLE CONTROLLED SUBSIDIARY" means any Restricted Subsidiary that is
primarily engaged, directly or indirectly, in one or more Cable Businesses.
"CABLE RELATED BUSINESS" means a Person which directly or indirectly
owns or provides a service or product used in a Cable Business, including,
without limitation, any television programming, production and/or licensing
business or any programming guide or telephone directory business or content or
software related thereto.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"CAPITAL STOCK SALE PROCEEDS" means the aggregate net sale proceeds
(including from the sale of any property received for the Capital Stock or the
fair market value of such property, as determined by an independent appraisal
firm) received by the Company or any Subsidiary of the Company from the issue or
sale (other than to a Subsidiary) by the Company of any class of its Capital
Stock after October 14, 1993 (including Capital Stock of the Company issued
after October 14, 1993 upon conversion of or in exchange for other securities of
the Company).
"CASH EQUIVALENTS" means (i) Permitted Currency, (ii) securities issued
or directly and fully guaranteed or insured by the United States government, a
European Union member government or any agency or instrumentality thereof having
maturities of not more than six months and two days from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States, the United Kingdom, the Republic of Ireland or any other European Union
member having capital and
3
<PAGE> 9
surplus in excess of $500.0 million, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above,
(v) commercial paper rated P-1 or the equivalent thereof by Moody's or
A-1 or the equivalent thereof by S & P and in each case maturing within
six months and two days after the date of acquisition and (vi) money
market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"CEDEL" means Cedelbank, S.A.
"CHANGE OF CONTROL" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder),
(ii) the approval by the requisite stockholders of the Company of a plan of
liquidation or dissolution of the Company, (iii) any "Person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting for the purpose
of acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of all classes of the voting stock of the
Company and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis, unless, as a result of such transaction, the ultimate
direct or indirect ownership of the Company is substantially the same
immediately after such transaction as it was immediately prior to such
transaction, or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Ratings Decline.
"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article V and thereafter means the successor.
"CONSOLIDATED INTEREST EXPENSE" means, for any Person, for any period,
the amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled to
be paid or accrued by such Person and its Subsidiaries (other than
Non-Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in such
capital lease obligation in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
(other than Non-Restricted Subsidiaries) for such
4
<PAGE> 10
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income of any Person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid to
the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income
of any Person that is a Subsidiary (other than a Subsidiary of which at
least 80% of the Capital Stock having ordinary voting power for the
election of directors or other governing body of such Subsidiary is
owned by the referent Person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of
dividends or distributions paid to the referent Person or a Wholly
Owned Subsidiary, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of
such acquisition shall be excluded and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
"CONVERTIBLE SUBORDINATED NOTES" means the Company's 7% Convertible
Subordinated Notes due 2008 issued pursuant to an indenture dated as of December
16, 1998 between the Company and The Chase Manhattan Bank, as trustee.
"CREDIT FACILITY" means the Facilities Agreement, dated October 17,
1997, between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc,
as arranger, Chase Manhattan International Limited, as agent and security
trustee and The Chase Manhattan Bank as issuer, as such Facilities Agreement may
be supplemented, amended, restated, modified, renewed, refunded, replaced or
refinanced, in whole or in part, from time to time in an aggregate outstanding
principal amount not to exceed the greater of (i) (pound)555.0 million and (ii)
the amount of the aggregate commitments thereunder as the same may be increased
after March 13, 1998 as contemplated by the Facilities Agreement as amended or
supplemented to March 13, 1998, but in no event greater than (pound)875.0
million, less in each case, the aggregate amount of all Net Proceeds of Asset
Sales that have been applied to permanently reduce Indebtedness under the Credit
Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be
incurred under this Indenture may, but need not, be incurred under the Credit
Facility without regard to the limit set forth in the preceding sentence.
Indebtedness outstanding under the Credit Facility on the date hereof shall be
deemed to have been incurred on such date in reliance on the exception provided
by Section 4.08(b)(i).
"CUMULATIVE EBITDA" means the cumulative EBITDA of the Company from and
after the Issuance Date to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries
shall not be included.
"CUMULATIVE INTEREST EXPENSE" means the aggregate amount of
Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued
by the Company from the Issuance Date to the end of the fiscal quarter
immediately preceding a proposed Restricted Payment, determined on a
consolidated basis in accordance with GAAP.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" shall mean DTC (in the case of the DTC Rule 144A Global
Notes), Euroclear (in the case of Regulation S Global Notes or Euroclear Rule
144A Global Notes) or Cedel (in the case of Regulation S Global Notes), as
applicable.
"DIAMOND NOTES" shall mean the 10% Diamond Senior Notes due 2008, the
9 1/8% Diamond Senior Notes due 2008, the 10 3/4% Diamond Senior Discount Notes
due 2007, the 11 3/4% Diamond Senior Discount Notes due 2005 and the 13 1/4%
Diamond Senior Discount Notes due 2004.
5
<PAGE> 11
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"DTC" means The Depository Trust Company.
"EBITDA" means, for any Person, for any period, an amount equal to (A)
the sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash item reducing
Consolidated Net Income for such period (excluding any such non-cash item to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period), minus (B) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined in accordance
with GAAP consistently applied.
"EEA GOVERNMENT OBLIGATION" means direct non-callable obligations of,
or non-callable obligations guaranteed by, any European Union member for the
payment of which obligation or guarantee the full faith and credit of the
respective nation is pledged; provided that such nation has a credit rating at
least equal to that of the highest rated member nation of the European Economic
Area.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office as operator of the Euroclear system.
"EUROPEAN ECONOMIC AREA" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area,
dated May 2, 1992, as amended.
"EUROPEAN UNION MEMBER" means any country that is or becomes a member
of the European Union or any successor organization thereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance and
other agreements or arrangements, or combination thereof, the principal purpose
of which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the Issuance Date, until such amounts are repaid,
including, without limitation, the Existing Notes.
"EXISTING NOTES" means the Old Notes and the Convertible Subordinated
Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
6
<PAGE> 12
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession, which are in effect on the
Issuance Date and are applied on a consistent basis.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the
register referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to capital leases and sale-and-leaseback transactions) or representing
any hedging obligations under an Exchange Rate Contract or an Interest Rate
Agreement, except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other than
obligations under an Exchange Rate Contract or an Interest Rate Agreement) would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and also includes, to the extent not otherwise included, the
Guarantee of items which would be included within this definition. The amount of
any Indebtedness outstanding as of any date shall be the accreted value thereof,
in the case of any Indebtedness issued with original issue discount.
"INDENTURE" means this Indenture, as amended from time to time.
"INITIAL PURCHASERS" means Morgan Stanley & Co. International Limited,
Goldman Sachs International, Chase Securities Inc., Donaldson, Lufkin & Jenrette
International, and Salomon Brothers International Limited.
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
similar agreement, the principal purpose of which is to protect the party
indicated therein against fluctuations in interest rates.
"INVESTMENT GRADE" means BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such ratings by S&P or Moody's. In the event that
the Company shall be permitted to select any other Rating Agency, the equivalent
of such ratings by such Rating Agency shall be used.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding commission,
travel and similar advances and loans, joint property ownership and other
arrangements, in each case, made to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"ISSUANCE DATE" means the date on which the Notes are first
authenticated and issued.
"LICENSE" means any license issued or awarded pursuant to the
Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the
Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in
7
<PAGE> 13
each case, as such Acts may, from time to time, be amended, modified or
re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a
Cable Business.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent or successor statutes) of any
jurisdiction).
"MATERIAL LICENSE" means a License held by the Company or any of its
Subsidiaries which License at the time of determination covers a number of Net
Households which equals or exceeds 5% of the aggregate number of Net Households
covered by all of the Licenses held by the Company and its Subsidiaries at such
time.
"MATERIAL SUBSIDIARY" means (i) NTL UK Group, Inc. (formerly known as
OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel
Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and
CableTel Kirklees and (ii) any other Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).
"MONETIZE" means a strategy with respect to Equity Interests that
generates an amount of cash equal to the fair value of such Equity Interests.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET HOUSEHOLDS" means the product of (i) the number of households
covered by a License in the United Kingdom and (ii) the percentage of the entity
holding such License which is owned directly or indirectly by the Company.
"NET INCOME" means, with respect to any Person for a specific period,
the net income (loss) of such Person during such period, determined in
accordance with GAAP, excluding, however, any gain (but not loss) during such
period, together with any related provision for taxes on such gain (but not
loss), realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period, together
with any related provision for taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"NON-CONTROLLED SUBSIDIARY" means an entity which is not a Cable
Controlled Subsidiary.
"NON-RECOURSE DEBT" means Indebtedness or that portion of Indebtedness
as to which none of the Company, nor any Restricted Subsidiary: (i) provides
credit support (including any undertaking, agreement or instrument which would
constitute Indebtedness); (ii) is directly or indirectly liable; or (iii)
constitutes the lender.
8
<PAGE> 14
"NON-RESTRICTED SUBSIDIARY" means (A) a Subsidiary that (a) at the time
of its designation by the Board of Directors as a Non-Restricted Subsidiary has
not acquired any assets (other than as specifically permitted by clause (e) of
"Permitted Investments" or Section 4.09 hereof), at any previous time, directly
or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no
Indebtedness other than Non-Recourse Debt and (c) that at the time of such
designation, after giving pro forma effect to such designation, the ratio of
Indebtedness to Annualized Pro Forma EBITDA of the Company is equal to or less
than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding such designation, provided, however, that if the ratio of
Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding
such designation is 6:1 or less, then the ratio of Indebtedness to Annualized
Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately
preceding such designation; (B) any Subsidiary which (a) has been acquired or
capitalized out of or by Equity Interests (other than Disqualified Stock) of the
Company or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other
than Non-Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by
the Board of Directors or is merged, amalgamated or consolidated with or into,
or its assets or capital stock is to be transferred to, a Non-Restricted
Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary.
"NOTES" has the meaning set forth in the preamble hereto. The Original
Notes and the Additional Notes shall be treated as a single class for all
purposes under this Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER'S CERTIFICATE" means a certificate signed by an Officer of the
Company. See Sections 10.04 and 10.05 hereof.
"OLD NOTES" means the 12 3/8% Notes, the 11 1/2% Notes, the 12 3/4%
Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the
9 3/4% Notes, the 1999 9 3/4% Notes and the 9 1/2% Notes.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 10.04 and 10.05 hereof.
"ORIGINAL NOTES" means the first euro210,000,000 in aggregate
principal amount at maturity of Notes issued under this Indenture on the date
hereof.
"OTHER QUALIFIED NOTES" means any outstanding senior indebtedness of
the Company issued pursuant to an indenture having a provision substantially
similar to Section 4.10 hereof (including, without limitation, the 2006 Notes,
the 2009 Notes, the 12 3/8% Notes, the 11 1/2% Notes, the 12 3/4% Notes, the 11
1/2% Deferred Coupon Notes, THE 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes,
the 1999 9 3/4% Notes, the 9 1/2% Notes and the Diamond Notes).
"PARTICIPANT" means with respect to the Depositary, a person who has an
account with the Depositary.
"PERMITTED ACQUIRED DEBT" means, with respect to any Acquired Person
(including, for this purpose, any Non-Restricted Subsidiary at the time such
Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of
such Acquired Person and its Subsidiaries in an amount (determined on a
consolidated basis) not exceeding the sum of (x) amount of the gross book value
of property, plant and equipment of the Acquired Person and its Subsidiaries as
set forth on the most recent consolidated
9
<PAGE> 15
balance sheet of the Acquired Person (which may be unaudited) prior to the date
it becomes an Acquired Person and (y) the aggregate amount of any Cash
Equivalents held by such Acquired Person at the time it becomes an Acquired
Person.
"PERMITTED CURRENCY" means the lawful currency of the United States or
a European Union member.
"PERMITTED DESIGNEE" means (i) a spouse or a child of a Permitted
Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child
of a Permitted Holder, (iii) in the event of the death or incompetence of a
Permitted Holder, his estate, heirs, executor, administrator, committee or other
personal representative or (iv) any Person so long as a Permitted Holder owns at
least 50% of the voting power of all classes of the voting stock of such Person.
"PERMITTED HOLDERS" means George S. Blumenthal, J. Barclay Knapp and
their Permitted Designees.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in
a Cable Controlled Property or in a Qualified Subsidiary (including, without
limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled
Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or
Guarantees or (iii) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary); (b) any Investments in Cash
Equivalents; (c) Investments by the Company in Indebtedness of a counter-party
to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that
are made, for purposes other than speculation, in connection with such contract
to hedge not more than the aggregate principal amount of the Indebtedness being
hedged (or, in the case of Indebtedness issued with original issue discount,
based on the amounts payable after the amortization of such discount); (d)
Investments by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Cable Controlled Subsidiary
or (ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance,
transfer or other conveyance of Equity Interests (other than Disqualified Stock)
in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of
the Company.
"PERMITTED LIENS" means (a) Liens in favor of the Company; (b) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not secure any property or assets of the Company or any of
its Subsidiaries other than the property or assets subject to the Liens prior to
such merger or consolidation; (c) liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or are being contested in good faith and by appropriate
proceedings; (d) Liens existing on the Issuance Date; (e) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor and (f) easements, rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties or minor
imperfections of title that, in the aggregate, are not material in amount, and
do not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Restricted Subsidiaries.
"PERMITTED NON-CONTROLLED ASSETS" means Equity Interests in any Person
primarily engaged, directly or indirectly, in one or more Cable Businesses if
such Equity Interests (x) were acquired by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale or any Investment
10
<PAGE> 16
otherwise permitted under the terms of the Indenture and (y) to the extent that,
after giving pro forma effect to the acquisition thereof by the Company or any
of its Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than
80% of Adjusted Total Assets based on the most recent consolidated balance sheet
of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREFERRED STOCK" means the 13% Senior Redeemable Exchangeable
Preferred Stock of the Company with an original aggregate liquidation preference
of $100,000,000.
"PRO FORMA EBITDA" means for any Person, for any period, the EBITDA of
such Person as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP after giving effect to the following: (i)
if, during or after such period, such Person or any of its Subsidiaries shall
have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries
for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Sale for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period and (ii) if,
during or after such period, such Person or any of its Subsidiaries completes an
acquisition of any Person or business which immediately after such acquisition
is a Subsidiary of such Person or whose assets are held directly by such Person
or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give
pro forma effect to the acquisition of such Person or business (without giving
effect to clause (iii) of the definition of Consolidated Net Income); and
provided further that, with respect to the Company, all of the foregoing
references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a
"Restricted Subsidiary" or "Restricted Subsidiaries" of the Company.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of November
19, 1999, between the Company and the Initial Purchasers.
"QUALIFIED SUBSIDIARY" means a Wholly Owned Subsidiary, or an entity
that will become a Wholly Owned Subsidiary after giving effect to the
transaction being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration, (i) is a Cable Business or
holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being
incurred to consummate such transaction) and (iii) has no encumbrances or
restrictions (other than such encumbrances or restrictions imposed or permitted
by this Indenture, the indentures governing the Old Notes or any other
instrument governing unsecured indebtedness of the Company which is pari passu
with the Notes) on its ability to pay dividends or make any other distributions
to the Company or any of its Subsidiaries.
"RATING AGENCIES" means (i) S&P, (ii) Moody's and (iii) if S&P or
Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories) and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining whether
the rating of the Notes has decreased by one or more gradations, gradations
within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the
equivalent gradations for another Rating Agency) shall be taken into
11
<PAGE> 17
account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as
well as from BB- to B+, will constitute a decrease of one gradation).
"RATING DATE" means that date which is 90 days prior to the earlier of
(x) a Change of Control and (y) public notice of the occurrence of a Change of
Control or of the intention by the Company or any Permitted Holder to effect a
Change of Control.
"RATINGS DECLINE" means the occurrence of any of the following events
on, or within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of the Company or any Person to effect a
Change of Control (which period shall be extended so long as the rating of any
of the Company's debt securities is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event that any of
the Company's debt securities are rated by both of the Rating Agencies on the
Rating Date as Investment Grade, the rating of such securities by either of the
Rating Agencies shall be below Investment Grade, (b) in the event that any of
the Company's debt securities are rated by either, but not both, of the Rating
Agencies on the Rating Date as Investment Grade, the rating of such securities
by both of the Rating Agencies shall be below Investment Grade, or (c) in the
event any of the Company's debt securities are rated below Investment Grade by
both of the Rating Agencies on the Rating Date, the rating of such securities by
either Rating Agency shall be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"REDEEMABLE DIVIDEND" means, for any dividend with regard to
Disqualified Stock, the quotient of the dividend divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Disqualified Stock.
"REGISTERED EXCHANGE OFFER" has the meaning set forth in the
Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
relating to the Notes, dated November 24, 1999, between the Company and the
Initial Purchasers and, with respect to any Additional Notes, one or more
registration rights agreements between the Company and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from time
to time, relating to rights given by the Company to the purchasers of Additional
Notes to register such Additional Notes under the Securities Act.
"REPLACEMENT ASSETS" means (w) Cable Assets, (x) Equity Interests of
any Person engaged, directly or indirectly, primarily in a Cable Business, which
Person is or will become on the date of acquisition thereof a Restricted
Subsidiary as a result of the Company's acquiring such Equity Interests, (y)
Permitted Non-Controlled Assets or (z) any combination of the foregoing.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is
not a Non-Restricted Subsidiary.
"RESTRICTED SUBSIDIARY PREFERRED STOCK DIVIDEND" means, for any
dividend with regard to preferred stock of a Restricted Subsidiary, the quotient
of the dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such preferred stock.
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<PAGE> 18
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBORDINATED DEBENTURES" means the debentures exchangeable by the
Company for the Preferred Stock in accordance with the Certificate of
Designations therefor.
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"TRUST OFFICER" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary
all of the Capital Stock of which (except directors' qualifying shares) is at
the time owned directly or indirectly by the Company.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"ADDITIONAL AMOUNTS"..........................................4.14
"AFFILIATE TRANSACTION".......................................4.11
"AGENT MEMBER"................................................2.01
"ASSET SALE OFFER"............................................4.10
"BANKRUPTCY LAW"..............................................6.01
"CHANGE OF CONTROL PAYMENT"...................................4.13
"COMMENCEMENT DATE"...........................................3.09
"COMMON DEPOSITARY"...........................................2.03
"CUSTODIAN"...................................................6.01
"DEFEASANCE"..................................................8.02
"EVENT OF DEFAULT"............................................6.01
"EXCESS PROCEEDS".............................................4.10
"GLOBAL NOTE".................................................2.01
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"INCUR".......................................................4.08
"INITIAL NOTES"...........................................Preamble
"LEGAL HOLIDAY"..............................................10.08
"OFFER AMOUNT"................................................3.09
"OFFICER"....................................................10.10
"PAYING AGENT"................................................2.03
"PAYMENT DEFAULT".............................................6.01
"PURCHASE DATE"...............................................3.09
"PURCHASE OFFER"..............................................4.13
"QIBs"........................................................2.01
"REFINANCING INDEBTEDNESS"....................................4.08
"REGULATION S"................................................2.01
"REGULATION S GLOBAL NOTES" ..................................2.10
"REGISTRAR"...................................................2.03
"RESTRICTED NOTES"............................................2.01
"RESTRICTED PAYMENTS".........................................4.09
"RULE 144A"...................................................2.01
"RULE 144A GLOBAL NOTES" .....................................2.01
"TENDER PERIOD"...............................................3.09
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "institutional trustee" means the Trustee; and
"OBLIGOR" on the Notes means the Company or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP consistently applied;
14
<PAGE> 20
(c) references to "GAAP" shall mean GAAP in effect as of the
time when and for the period as to which such accounting principles are
to be applied;
(d) "OR" is not exclusive;
(e) words in the singular include the plural, and in the
plural include the singular;
(f) provisions apply to successive events and transactions;
(g) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time; and
(h) a reference to "$" or U.S. Dollars is to United States
dollars, a reference to "(pound)" or pounds sterling is to British
pounds sterling and a reference to "EURO" or euros is to European
Monetary Union euros.
ARTICLE II.
THE NOTES
SECTION 2.01 FORM AND DATING.
(a) General.
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated by reference and expressly made a part of this Indenture.
The Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
The Company shall furnish any such legend not contained in Exhibit A or Exhibit
B to the Trustee in writing. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of euro1,000 and integral
multiples thereof. The terms and provisions of the Notes set forth in Exhibit A
and Exhibit B are part of this Indenture and to the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
The Initial Notes are being offered and sold by the Company
pursuant to the Purchase Agreement.
Initial Notes offered and sold in reliance on Regulation S
under the Securities Act ("REGULATION S"), as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent Global
Notes in definitive, fully registered form without interest coupons with the
Global Note Legend and Regulation S Restricted Notes Legend set forth in Exhibit
A hereto (the "REGULATION S GLOBAL NOTES"). Initial Notes offered and sold to
Qualified Institutional Buyers ("QIBs") in reliance on
15
<PAGE> 21
Rule 144A under the Securities Act ("RULE 144A"), as provided
in the Purchase Agreement, shall be issued initially in the form of one
or more permanent Global Notes in definitive, fully registered form
without interest coupons with the Global Notes Legend and Rule 144A
Restricted Notes Legend set forth in Exhibit A hereto (in the case of
Rule 144A Global Notes to be held on behalf of Euroclear, the
"EUROCLEAR RULE 144A GLOBAL NOTES", in the case of Rule 144A Global
Notes to be held on behalf of DTC, the "DTC RULE 144A GLOBAL NOTES",
and collectively, the "RULE 144A GLOBAL Notes"). The Regulation S
Restricted Notes Legend and the Rule 144A Restricted Notes Legend as
set forth in Exhibit A hereto are herein collectively called the
"RESTRICTED NOTES LEGEND". Each Global Note shall be deposited on
behalf of the Initial Purchasers of the Notes represented thereby with
(i) in the case of Euroclear Rule 144A Global Notes and Regulation S
Global Notes to be held on behalf of Euroclear and Cedel the Common
Depositary, at its London office, as custodian for the Depositary, and
registered in the name of the Common Depositary or the nominee of the
Common Depositary for the accounts of designated agents holding on
behalf of the Depositary, and (ii) in the case of DTC Rule 144A Global
Notes, with the Trustee, at its New York office, as custodian for the
Depositary, and registered in the name of the Depositary or the nominee
of the Depositary, in either case duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate
principal amount at maturity of each Global Note may from time to time
be increased or decreased by adjustments made on the records of the
Trustee, the Common Depositary, or its nominee, and the Depositary or
its nominee as hereinafter provided.
Upon consummation of the Registered Exchange Offer, the
Exchange Notes may be issued in the form of one or more permanent Global Notes
in definitive, fully registered form without interest coupons with the Global
Notes Legend but not the Restricted Notes Legend set forth in Exhibit A hereto,
(i) in the case of Euroclear Rule 144A Global Notes and Regulation S Global
Notes to be held on behalf of Euroclear and Cedel, registered in the name of the
Common Depositary or a nominee of the Common Depositary, and (ii) in the case of
DTC Rule 144A Global Notes, registered in the name of the Depositary or the
nominee of the Depositary, and in either case, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount at maturity of such Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee the Common
Depositary or its nominee, and the Depositary or its nominee as hereinafter
provided.
After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to the Initial
Notes and pursuant thereto, all requirements for Restricted Notes Legends on
such Initial Note will cease to apply.
(c) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be
applicable to transfers of beneficial interests in the Global Notes that are
held by the Holders through Euroclear or Cedel.
(d) Book-Entry Provisions.
This Section 2.01(d) shall apply only to the Regulation S
Global Notes, the Rule 144A Global Notes and the Exchange Notes issued in the
form of one or more permanent Global Notes (collectively, the "GLOBAL NOTES")
deposited with the Common Depositary, on behalf of the Depositary or the
Trustee, as custodian for the Depositary, as applicable.
16
<PAGE> 22
The Company shall execute and the Trustee shall, in accordance
with this Section 2.01(d), authenticate and deliver initially one or more Global
Notes that (i) in the case of Euroclear Rule 144A Global Notes and Regulation S
Global Notes to be held on behalf of Euroclear and Cedel, (A) shall be
registered in the name of the Common Depositary for such Global Note or the
nominee of the Common Depositary and (B) shall be delivered by the Trustee to
the Depositary or pursuant to the Depositary's instructions to the Common
Depositary as custodian for the Depositary and (ii) in the case of DTC Rule 144A
Global Notes (A) shall be registered in the name of the Depositary or the
nominee of the Depositary and (B) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as custodian for the Depositary.
Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary or by the Common Depositary or the
Trustee as the custodian of the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of an owner of a beneficial interest in any Global Note.
SECTION 2.02 EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of an authorized officer of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate (1) Initial Notes for original issue up to an aggregate
principal amount at maturity stated in paragraph 6 of the Initial Notes and (2)
Exchange Notes for issue only in a Registered Exchange Offer, pursuant to the
Registration Rights Agreement, in exchange for Initial Notes for a like
principal amount at maturity. The Trustee shall, upon a written order of the
Company signed by an Officer, authenticate Additional Notes for original issue
up to euro65,000,000 aggregate principal amount at maturity. Upon original
issue, Additional Notes shall be treated as Initial Notes for all purposes of
this Indenture, and upon exchange for Notes registered under the Securities Act
pursuant to a Registered Exchange Offer, Additional Notes delivered in such
exchange shall be treated as Exchange Notes for all purposes of this Indenture.
The aggregate principal amount at maturity of Notes outstanding at any time
shall not exceed the amount set forth herein, except as provided in Section
2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders, the
Company or an Affiliate.
SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New
York, State of New York and London, England and, if and as long as the Notes are
listed on the Luxembourg Stock Exchange, in
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Luxembourg, (i) offices or agencies where the Notes may be
presented for registration of transfer or for exchange ("REGISTRAR")
and (ii) offices or agencies where the Notes may be presented for
payment ("PAYING AGENT"). The Company initially designates The Chase
Manhattan Bank (London) at its offices in London to act as principal
Registrar and Paying Agent and the Trustee at its corporate trust
offices in New York, New York and Chase Manhattan Bank Luxembourg S.A.
to act as a Registrar and Paying Agent. The principal Registrar shall
keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more
additional paying agents in such other locations as it shall determine.
The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without prior notice to any Holder. The
Company shall notify the Trustee of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall
act as such. The Company or any of its Affiliates may act as Paying
Agent or Registrar.
Initially, The Chase Manhattan Bank (London) will act as common
depositary (the "COMMON DEPOSITARY") with respect to the Euroclear Rule 144A
Global Notes and Regulation S Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal or interest on the Notes, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any money disbursed by it. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or an Affiliate
of the Company) shall have no further liability for the money. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders.
SECTION 2.06 TRANSFER AND EXCHANGE.
Where Notes are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal amount
at maturity of Notes of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are met.
To permit registrations of transfers and exchanges, the Company shall issue and
the Trustee shall authenticate Notes at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange (except as
otherwise expressly permitted herein), but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer tax or similar
governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or
9.05 hereof).
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note for a period beginning at the opening of business 15
days before the day of any selection of Notes to be
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redeemed under Section 3.02 hereof and ending at the close of business on the
day of selection, or (ii) to register the transfer, or exchange, of any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
(a) Notwithstanding any provision to the contrary herein, so
long as a Global Note remains outstanding and is held by or on behalf
of the Depositary, transfers of a Global Note, in whole or in part, or
of any beneficial interest therein, shall only be made in accordance
with Section 2.01(b) and this Section 2.06(a); provided, however, that
beneficial interests in a Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Global Note in accordance with the transfer restrictions set forth in
the Restricted Notes Legend and under the heading "Transfer
Restrictions" in the Company's Offering Memorandum dated November 19,
1999.
(i) Except for transfers or exchanges made in accordance with
clauses (ii) through (iv) of this Section 2.06(a), transfers of a
Global Note shall be limited to transfers of such Global Note in whole,
but not in part, to nominees of the Depositary or to the custodians of
the Depositary or nominees thereof or to a successor of the Depositary
or such successor's nominee or to custodians of such successor
Depositary or nominees thereof.
(ii) Rule 144A Global Note to Regulation S Global Note. If an
owner of a beneficial interest in the Rule 144A Global Note deposited
with the Depositary or the Trustee as custodian for the Depositary
wishes at any time to transfer its interest in such Rule 144A Global
Note to a Person who is required to take delivery thereof in the form
of an interest in the Regulation S Global Note, such owner may, subject
to the rules and procedures of the Depositary, exchange or cause the
exchange of such interest for an equivalent beneficial interest in the
Regulation S Global Notes. Upon receipt by the principal Registrar of
(1) instructions given in accordance with the Depositary's procedures
from an Agent Member directing the principal Registrar to credit or
cause to be credited a beneficial interest in the Regulation S Global
Note in an amount equal to the beneficial interest in the Rule 144A
Global Note to be exchanged, (2) a written order given in accordance
with the Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear or Cedel
account to be credited with such increase and (3) a certificate in the
form of Exhibit C attached hereto given by the Holder of such
beneficial interest, then the principal Registrar shall instruct the
Depositary to reduce or cause to be reduced the principal amount of the
Rule 144A Global Note and to increase or cause to be increased the
principal amount of the Regulation S Global Note by the aggregate
principal amount of the beneficial interest in the Rule 144A Global
Note equal to the beneficial interest in the Regulation S Global Note
to be exchanged or transferred, to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Regulation S Global Note equal to the reduction in the
principal amount of the Rule 144A Global Note and to debit or cause to
be debited from the account of the Person making such exchange or
transfer the beneficial interest in the Rule 144A Global Note that is
being exchanged or transferred.
(iii) Regulation S Global Note to Rule 144A Global Note. If an
owner of a beneficial interest in the Regulation S Global Note
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such
Regulation S Global Note to a Person who is required to take delivery
thereof in the form of an interest in the Rule 144A Global Note, such
Holder may, subject to the rules
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and procedures of the Depositary, exchange or cause the exchange of
such interest for an equivalent beneficial interest in the Rule 144A
Global Note. Upon receipt by the principal Registrar of (1)
instructions from the Depositary, directing the principal Registrar to
credit or cause to be credited a beneficial interest in the Rule 144A
Global Note equal to the beneficial interest in the Regulation S Global
Note to be exchanged or transferred, such instructions to contain
information regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in accordance
with the Depositary's procedures containing information regarding the
participant account of the Depositary and (3) a certificate in the form
of Exhibit D attached hereto given by the owner of such beneficial
interest, then the principal Registrar will instruct the Depositary to
reduce or cause to be reduced the Regulation S Global Note and to
increase or cause to be increased the principal amount of the Rule 144A
Global Note by the aggregate principal amount of the beneficial
interest in the Regulation S Global Note to be exchanged or
transferred, and the principal Registrar shall instruct the Depositary,
concurrently with such reduction, to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Rule 144A Global Note equal to the reduction in the
principal amount of the Regulation S Global Note and to debit or cause
to be debited from the account of the Person making such exchange or
transfer the beneficial interest in the Regulation S Global Note that
is being exchanged or transferred.
(iv) DTC Rule 144A Global Note to Euroclear Rule 144A Global
Note. If an owner of a beneficial interest in the DTC Rule 144A Global
Note deposited with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such DTC Rule
144A Global Note to a Person who is required to take delivery thereof
in the form of an interest in the Euroclear Rule 144A Global Note, such
owner may, subject to the rules and procedures of the Depositary,
exchange or cause the exchange of such interest for an equivalent
beneficial interest in the Euroclear Rule 144A Global Notes. Upon
receipt by the principal Registrar of (1) instructions given in
accordance with the Depositary's procedures from an Agent Member
directing the principal Registrar to credit or cause to be credited a
beneficial interest in the Euroclear Rule 144A Global Note in an amount
equal to the beneficial interest in the DTC Rule 144A Global Note to be
exchanged, (2) a written order given in accordance with the
Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear account to be
credited with such increase and (3) a certificate in the form of
Exhibit D attached hereto given by the Holder of such beneficial
interest, then the principal Registrar shall instruct the Depositary to
reduce or cause to be reduced the principal amount of the DTC Rule 144A
Global Note and to increase or cause to be increased the principal
amount of the Euroclear Rule 144A Global Note by the aggregate
principal amount of the beneficial interest in the DTC Rule 144A Global
Note equal to the beneficial interest in the Euroclear Rule 144A Global
Note to be exchanged or transferred, to credit or cause to be credited
to the account of the Person specified in such instructions a
beneficial interest in the Euroclear Rule 144A Global Note equal to the
reduction in the principal amount of the DTC Rule 144A Global Note and
to debit or cause to be debited from the account of the Person making
such exchange or transfer the beneficial interest in the DTC Rule 144A
Global Note that is being exchanged or transferred.
(v) Euroclear Rule 144A Global Note to DTC Rule 144A Global
Note. If an owner of a beneficial interest in the Euroclear Rule 144A
Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary wishes at any time to
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transfer its interest in such Euroclear Rule 144A Global Note
to a Person who is required to take delivery thereof in the form of an
interest in the DTC Rule 144A Global Note, such Holder may, subject to
the rules and procedures of the Depositary, exchange or cause the
exchange of such interest for an equivalent beneficial interest in the
DTC Rule 144A Global Note. Upon receipt by the principal Registrar of
(1) instructions from the Depositary, directing the principal Registrar
to credit or cause to be credited a beneficial interest in the DTC Rule
144A Global Note equal to the beneficial interest in the Euroclear Rule
144A Global Note to be exchanged or transferred, such instructions to
contain information regarding the participant account with the
Depositary to be credited with such increase, (2) a written order given
in accordance with the Depositary's procedures containing information
regarding the participant account of the Depositary and (3) a
certificate in the form of Exhibit D attached hereto given by the owner
of such beneficial interest, then the principal Registrar, as the case
may be, will instruct the Depositary to reduce or cause to be reduced
the Euroclear Rule 144A Global Note and to increase or cause to be
increased the principal amount of the DTC Rule 144A Global Note by the
aggregate principal amount of the beneficial interest in the Euroclear
Rule 144A Global Note to be exchanged or transferred, and the principal
Registrar shall instruct the Depositary, concurrently with such
reduction, to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the DTC
Rule 144A Global Note equal to the reduction in the principal amount of
the Euroclear Rule 144A Global Note and to debit or cause to be debited
from the account of the Person making such exchange or transfer the
beneficial interest in the Euroclear Rule 144A Global Note that is
being exchanged or transferred.
(vi) Global Note to Restricted Note. If an owner of a
beneficial interest in a Global Note deposited with the Depositary or
with the Trustee as custodian for the Depositary wishes at any time to
transfer its interest in such Global Note to a Person who is required
to take delivery thereof in the form of a Restricted Note, such owner
may, subject to the rules and procedures of the Depositary, cause the
exchange of such interest for one or more Restricted Notes of any
authorized denomination or denominations and of the same aggregate
principal amount at maturity. Upon receipt by the principal Registrar
of (1) instructions from the Depositary directing the principal
Registrar to authenticate and deliver one or more Restricted Notes of
the same aggregate principal amount at maturity as the beneficial
interest in the Global Note to be exchanged, such instructions to
contain the name or names of the designated transferee or transferees,
the authorized denomination or denominations of the Restricted Notes to
be so issued and appropriate delivery instructions, (2) a certificate
in the form of Exhibit E attached hereto given by the owner of such
beneficial interest to the effect set forth therein, (3) a certificate
in the form of Exhibit F attached hereto given by the Person acquiring
the Restricted Notes for which such interest is being exchanged, to the
effect set forth therein, and (4) such other certifications, legal
opinions or other information as the Company may reasonably require to
confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of
the Securities Act, then the principal Registrar, will instruct the
Depositary to reduce or cause to be reduced such Global Note by the
aggregate principal amount at maturity of the beneficial interest
therein to be exchanged and to debit or cause to be debited from the
account of the Person making such transfer the beneficial interest in
the Global Note that is being transferred, and concurrently with such
reduction and debit the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Restricted Notes of the same
aggregate principal amount at maturity in accordance with the
instructions referred to above.
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(vii) Restricted Note to Restricted Note. If a Holder of a
Restricted Note wishes at any time to transfer such Restricted Note to
a Person who is required to take delivery thereof in the form of a
Restricted Note, such Holder may, subject to the restrictions on
transfer set forth herein and in such Restricted Note, cause the
exchange of such Restricted Note for one or more Restricted Notes of
any authorized denomination or denominations and of the same aggregate
principal amount at maturity. Upon receipt by the principal Registrar
of (1) such Restricted Note, duly endorsed as provided herein, (2)
instructions from such Holder directing the principal Registrar to
authenticate and deliver one or more Restricted Notes of the same
aggregate principal amount at maturity as the Restricted Note to be
exchanged, such instructions to contain the name or authorized
denomination or denominations of the Restricted Notes to be so issued
and appropriate delivery instructions, (3) a certificate from the
Holder of the Restricted Note to be exchanged in the form of Exhibit E
attached hereto, (4) a certificate in the form of Exhibit F attached
hereto given by the Person acquiring the Restricted Notes for which
such interest is being exchanged, to the effect set forth therein, and
(5) such other certifications, legal opinions or other information as
the Company may reasonably require to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act, then
the Registrar shall cancel or cause to be canceled such Restricted Note
and concurrently therewith, the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Restricted Notes of the
same aggregate principal amount at maturity, in accordance with the
instructions referred to above.
(viii) Other Exchanges. In the event that a beneficial
interest in a Global Note is exchanged for Notes in definitive
registered form pursuant to Section 2.10, prior to the effectiveness of
a Shelf Registration Statement with respect to such Notes, such Notes
may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of clauses (ii) and (iii)
above (including the certification requirements intended to ensure that
such transfers comply with Rule 144A, Rule 144, Regulation S or any
other available exemption from registration, as the case may be) and
such other procedures as may from time to time be adopted by the
Company.
(ix) Restricted Period. Prior to the termination of the
Restricted Period with respect to the issuance of the Notes, transfers
of interests in the Regulation S Global Note to "U.S. PERSONS" (as
defined in Regulation S) shall be limited to transfers to QIBs. The
Company shall advise the Trustee as to the termination of the
Restricted Period and the Trustee may rely conclusively thereon.
(b) Except in connection with a Registered Exchange Offer or a
Shelf Registration Statement contemplated by and in accordance with the
terms of the Registration Rights Agreement, if Initial Notes are issued
upon the transfer, exchange or replacement of Initial Notes bearing the
Restricted Notes Legend set forth in Exhibit A hereto, or if a request
is made to remove such Restricted Notes Legend on Initial Notes, the
Initial Notes so issued shall bear the applicable Restricted Notes
Legend, or the Restricted Notes Legend shall not be removed, as the
case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel licensed to practice
law in the State of New York, as may be reasonably required by the
Company, that neither the legend nor the restrictions on transfer set
forth therein are required to ensure that transfers thereof comply with
the provisions of Rule 144A, Rule 144, Regulation S or any other
available exemption from registration under the Securities Act or, with
respect to Restricted Notes, that such Notes are not "restricted"
within the meaning of Rule 144 under the Securities Act. Upon provision
of such satisfactory evidence, the
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Trustee, at the direction of the Company, shall authenticate
and deliver Initial Notes that do not bear the legend.
(c) Neither the Company nor the Trustee shall have any
responsibility for any actions taken or not taken by the Depositary and
the Company shall have no responsibility for any actions taken or not
taken by the Trustee as agent or custodian of the Depositary.
SECTION 2.07 REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed
or wrongfully taken or if such Note is mutilated and is surrendered to the
Trustee, the Company shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's and the Company's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of both to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Note is held by a bona
fide purchaser.
If the principal amount or Accreted Value, as applicable, of any Note
is considered paid under Section 4.01 hereof, such Note ceases to be outstanding
and interest on it ceases to accrue (or, if before November 15, 2004, the
Accreted Value of such Note ceases to increase).
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount at
maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company or an Affiliate of the Company shall be considered as
though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes that the Trustee knows are so owned shall be so
disregarded.
SECTION 2.10 TEMPORARY NOTES; GLOBAL NOTES.
(a) Until definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for
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temporary Notes. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Holders of temporary Notes shall be entitled to all of
the benefits of this Indenture.
(b) A Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.01 shall
be transferred to the beneficial owners thereof in the form of
certificated Notes only if such transfer complies with Section 2.06 and
(i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Note or if at any time such
Depositary ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by the Company
within 90 days of such notice, or (ii) an Event of Default has occurred
and is continuing.
(c) Any Global Note that is transferable to the beneficial
owners thereof in the form of certificated Notes pursuant to this
Section 2.10 shall be surrendered by or on behalf of the Depositary to
the Trustee to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Note, an equal
aggregate principal amount at maturity of Initial Notes of authorized
denominations in the form of certificated Notes. Any portion of a
Global Note transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of EURO 1,000 and any
integral multiple thereof and registered in such names as the
Depositary shall direct. Any Initial Note in the form of certificated
Notes delivered in exchange for an interest in the Global Notes shall,
except as otherwise provided by Section 2.06(b) bear the Restricted
Notes Legend set forth in Exhibit A hereto (the "RESTRICTED NOTES").
(d) The registered Holder of a Global Note may grant proxies
and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Notes.
(e) In the event of the occurrence of either of the events
specified in Section 2.10(b), the Company will promptly make available
to the Trustee a reasonable supply of certificated Notes in definitive,
fully registered form without interest coupons.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall promptly cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
canceled Notes as the Company directs. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it
shall pay such defaulted interest plus any interest payable on the defaulted
interest, in any lawful manner. It may pay such defaulted interest, plus any
such interest payable on it, to the Persons who are Holders on a subsequent
special record date. The Company shall fix any such record date and payment
date, provided that no such record date shall be less than 10 days prior to the
related payment date for such defaulted interest. At least 15 days before any
such record date, the Company shall mail to Holders a notice that states the
special record date, the related payment date and amount of such interest to be
paid.
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ARTICLE III.
REDEMPTION
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of the Notes and Section 3.07 hereof or pursuant to the
Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes
and Section 7 of the Exchange Notes), it shall notify the Trustee of the
redemption date and the principal amount at maturity of Notes to be redeemed,
and in connection with an Optional Tax Redemption as provided in the Notes, such
notice shall be accompanied by an Officer's Certificate to the effect that the
conditions to such redemption contained herein have been complied with. The
Company shall give each notice provided for in this Section 3.01 at least 50
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, selection
of Notes shall be made by the Trustee on a pro rata basis or by lot or by method
that complies with the requirements of any exchange on which the Notes are
listed and that the Trustee considers fair and appropriate, provided that no
Notes of euro1,000 or less at maturity shall be redeemed in part. The Trustee
shall make the selection not more than 60 days and not less than 30 days before
the redemption date from Notes outstanding not previously called for redemption.
Notes and portions of Notes selected shall be in amounts of euro1,000 or
integral multiples of euro1,000. Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address. The notice
shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is to be redeemed in part only, the portion of
the principal amount at maturity thereof redeemed, and that, after the
redemption date, upon surrender of such Note, a new Note in principal
amount at maturity equal to the unredeemed portion thereof shall be
issued in the name of the Holder thereof upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price plus accrued interest,
if any;
(f) that interest on Notes called for redemption ceases to
accrue on and after the redemption date (or, in the case of redemption
prior to November 15, 2004, the Accreted Value will cease to increase
after the redemption date); and
(g) the paragraph of the Notes pursuant to which the Notes
called for redemption are being redeemed.
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At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense; provided that the Company shall have
delivered to the Trustee, at least 45 days prior to the redemption date, an
Officer's Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice, as provided in the preceding
paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become due and payable on the redemption
date at the price set forth in the Note. A notice of redemption may not be
conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money not required
for that purpose.
SECTION 3.06 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount at maturity to the unredeemed
portion of the Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION AND OPTIONAL TAX REDEMPTION.
The Company may redeem all or any portion of the Notes, upon the terms
and at the redemption prices set forth in each of the Notes. The Company may
also redeem all of the Notes in accordance with the Optional Tax Redemption
provision of the Notes (Section 8 of the Initial Notes and Section 7 of the
Exchange Notes). Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
SECTION 3.09 ASSET SALE OFFER AND PURCHASE OFFER.
(a) In the event that the Company shall commence an offer to
all Holders of the Notes to purchase Notes pursuant to Section 4.10
hereof (the "ASSET SALE OFFER") or pursuant to Section 4.13 hereof (the
"PURCHASE OFFER"), the Company shall follow the procedures in this
Section 3.09.
(b) The Asset Sale Offer or the Purchase Offer, as the case
may be, shall remain open for a period specified by the Company which
shall be no less than 30 calendar days and no more than 40 calendar
days following its commencement (the "COMMENCEMENT DATE") (as
determined in accordance with Section 4.10 or 4.13 hereof, as the case
may be), except to the extent that a longer period is required by
applicable law (the "TENDER PERIOD"). Upon the expiration of the Tender
Period (the "PURCHASE DATE"), the Company shall purchase the Accreted
Value (if prior to November 15, 2004) or principal amount (if on or
after November 15, 2004) of Notes required to be purchased pursuant to
Section 4.10 or 4.13 hereof (the "OFFER AMOUNT") or, if less than the
Offer Amount has been tendered, all Notes tendered in response to the
Asset Sale Offer or the Purchase Offer, as the case may be.
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(c) If the Purchase Date is (i) on or after November 15, 2004,
(ii) on or after an interest payment record date and (iii) on or before
the related interest payment date, any accrued interest shall be paid
to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Asset Sale Offer or
the Purchase Offer, as the case may be.
(d) The Company shall provide the Trustee with notice of the
Asset Sale Offer or the Purchase Offer, as the case may be, at least 10
days before the Commencement Date.
(e) On or before the Commencement Date, the Company or the
Trustee (at the expense of the Company) shall send, by first class
mail, a notice to each of the Holders, which shall govern the terms of
the Asset Sale Offer or the Purchase Offer and shall state:
(i) that the Asset Sale Offer or the Purchase Offer is being
made pursuant to this Section 3.09 and, as applicable, Section 4.10 or
4.13 hereof and the length of time the Asset Sale Offer or the Purchase
Offer will remain open;
(ii) the Offer Amount, the purchase price (as determined in
accordance with Section 4.10 or 4.13 hereof) and the Purchase Date, and
in the case of a Purchase Offer made pursuant to Section 4.13 hereof,
that all Notes tendered will be accepted for payment;
(iii) that any Note or portion thereof not tendered or
accepted for payment will continue to accrue interest (or, if
applicable, that the Accreted Value of any Note or portion thereof not
tendered or accepted for payment will continue to increase as provided
in such Notes);
(iv) that, unless the Company defaults in the payment of the
purchase price, any Note or portion thereof accepted for payment
pursuant to the Asset Sale Offer or the Purchase Offer will cease to
accrue interest after the Purchase Date (or, if applicable, the
Accreted Value of any Note or portion thereof accepted for payment
pursuant to the Asset Sale Offer or Purchase Offer will cease to
increase after the Purchase Date as provided in such Notes);
(v) that Holders electing to have a Note or portion thereof
purchased pursuant to any Asset Sale Offer or Purchase Offer will be
required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, to the
Company, a depositary, if appointed by the Company, or a Paying Agent
at the address specified in the notice prior to the close of business
on the third Business Day preceding the Purchase Date;
(vi) that Holders will be entitled to withdraw their election
if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the close of business on the second Business
Day preceding the Purchase Date, or such longer period as may be
required by law, a letter or a telegram, telex or facsimile
transmission (receipt of which is confirmed and promptly followed by a
letter) setting forth the name of the Holder, the principal amount at
maturity of the Note or portion thereof the Holder delivered for
purchase and a statement that such Holder is withdrawing his election
to have the Note or portion thereof purchased;
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(vii) that, in the event of an Asset Sale Offer, if the
aggregate principal amount at maturity of Notes surrendered by Holders
exceeds the Offer Amount, the Trustee will select the Notes to be
purchased pro rata or by a method that complies with the requirements
of any exchange on which the Notes are listed and that the Trustee
considers fair and appropriate with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of
(a)1,000, or integral multiples thereof, shall be purchased; and
(viii) that Holders whose Notes were purchased only in part
will be issued new Notes equal in principal amount at maturity to the
unpurchased portion of the Notes surrendered.
In addition, the notice shall, to the extent permitted by applicable
law, be accompanied by a copy of the information regarding the Company and its
Subsidiaries which is required to be contained in the most recent Quarterly
Report on Form 10-Q or Annual Report on Form 10-K (including any financial
statements or other information required to be included or incorporated by
reference therein) and any Reports on Form 8-K filed since the date of such
Quarterly Report or Annual Report (or would have been required to file if the
Company remained a company incorporated in the United States), as the case may
be, which the Company has filed (or would have been required to file if it
remained a company incorporated in the United States) with the SEC on or prior
to the date of the notice. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer or the Purchase Offer, as the case may be.
(f) At least one Business Day prior to the Purchase Date, the
Company shall irrevocably deposit with the Trustee or a Paying Agent in
immediately available funds an amount equal to the Offer Amount to be
held for payment in accordance with the terms of this Section. On the
Purchase Date, the Company shall, to the extent lawful, (i) accept for
payment the Notes or portions thereof tendered pursuant to the Asset
Sale Offer or the Purchase Offer, (ii) deliver or cause the depositary
or Paying Agent to deliver to the Trustee Notes so accepted and (iii)
deliver to the Trustee an Officer's Certificate stating such Notes or
portions thereof have been accepted for payment by the Company in
accordance with the terms of this Section 3.09. The depositary, the
Paying Agent or the Company, as the case may be, shall promptly (but in
any case not later than ten (10) calendar days after the Purchase Date)
mail or deliver to each tendering Holder an amount equal to the
purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Note equal in principal amount at
maturity to any unpurchased portion of the Note surrendered. Any Notes
not so accepted shall be promptly mailed or delivered by or on behalf
of the Company to the Holder thereof. The Company will publicly
announce in a newspaper of general circulation the results of the Asset
Sale Offer or the Purchase Offer on the Purchase Date.
(g) For the purposes of calculating the allocation of
available Excess Proceeds to the Notes and each issue of Other
Qualified Notes on a pro rata basis according to accreted value or
principal amount, as the case may be, the relevant principal amount or
the accreted value, as the case may be, of the Notes and any Other
Qualified Notes denominated in a currency other than United States
dollars will be notionally converted into United States dollars from
the currency the Notes and such Other Qualified Notes are denominated
in (the "BASE CURRENCY");
(i) in the case of determining the maximum principal amount or
accreted value of Notes and Other Qualified Notes that may be purchased
out of the Excess Proceeds, at the noon buying rate in the City of New
York as certified for customs purposes by the Federal Reserve Bank of
New York for cable transfers in the Base
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Currency (the "NOON BUYING RATE") on the Business Day which is
10 Business Days prior to the Commencement Date; and
(ii) in the case of determining the allocation of the
remaining Excess Proceeds if the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes
surrendered by holders in the Asset Sale Offer exceeds the remaining
amount of Excess Proceeds, at the Noon Buying Rate on the second
Business Day preceding the Purchase Date.
(h) The Asset Sale Offer or the Purchase Offer shall be made
by the Company in compliance with all applicable provisions of the
Exchange Act, and all applicable tender offer rules promulgated
thereunder, and shall include all instructions and materials necessary
to enable such Holders to tender their Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay the principal of, premium, if any, and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent (other than the Company or an Affiliate of the Company) holds on
that date money designated for and sufficient to pay all principal and interest
then due. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i) the
overdue Accreted Value of the Notes, if prior to November 15, 2004, or the
overdue principal and premium, if any, if on or after November 15, 2004, at the
rate borne by the Notes, compounded semiannually; and (ii) overdue installments
of interest (without regard to any applicable grace period) at the same rate,
compounded semiannually.
SECTION 4.02 REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall file with the SEC and
furnish to the Trustee and to the Holders of Notes, all quarterly and annual
financial information required to be contained in a filing with the SEC on Forms
10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign
private issuers in the event the Company becomes a corporation organized under
the laws of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands), including a "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants, in each case, in the form required by the rules and
regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will
apply notwithstanding that the Company becomes a corporation organized under the
laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands.
SECTION 4.03 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officer's Certificate stating that a
review of the activities of the Company and its subsidiaries during the
preceding fiscal year has been made under the supervision of the signing Officer
with a view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under, and complied with the covenants and conditions
contained in, this Indenture, and further stating, as to the Officer signing
such certificate, that to the best of his knowledge the Company has kept,
observed, performed and fulfilled each and every covenant, and complied with the
covenants
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and conditions contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he may have knowledge) and that to
the best of his knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest, if any, on
the Notes are prohibited.
One of the Officers signing such Officer's Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon becoming aware of any Default or Event of Default
an Officer's Certificate specifying such Default or Event of Default.
Immediately upon the occurrence of any event giving rise to the accrual
of Special Interest (as such term is defined in Exhibit A hereto) or the
cessation of such accrual, the Company shall give the Trustee notice thereof and
of the event giving rise to such accrual or cessation (such notice to be
contained in an Officer's Certificate) and prior to receipt of such Officer's
Certificate the Trustee shall be entitled to assume that no such accrual has
commenced or ceased, as the case may be.
SECTION 4.04 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.05 CORPORATE EXISTENCE.
Subject to Article V hereof, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each subsidiary
of the Company in accordance with the respective organizational documents of
each subsidiary and the rights (charter and statutory), licenses and franchises
of the Company and its subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its subsidiaries taken as a
whole and that the loss thereof is not adverse in any material respect to the
Holders. The Company shall notify the Trustee in writing of any subsidiary which
qualifies as a Material Subsidiary and is not specified in clause (i) of the
definition thereof.
SECTION 4.06 TAXES.
The Company shall, and shall cause each of its subsidiaries to, pay
prior to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings.
SECTION 4.07 LIMITATIONS ON LIENS.
Neither the Company nor any of its Restricted Subsidiaries may,
directly or indirectly create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except:
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(a) Permitted Liens;
(b) Liens securing Indebtedness and related obligations to the
extent such Indebtedness and related obligations are permitted under
Sections 4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof;
(c) Liens on the assets acquired or leased with the proceeds
of Indebtedness permitted to be incurred under Section 4.08 hereof; and
(d) Liens securing Refinancing Indebtedness permitted to be
incurred under Section 4.08 hereof; provided that the Refinancing
Indebtedness so issued and secured by such Lien shall not be secured by
any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets subject to the Liens
securing such Indebtedness being refinanced.
SECTION 4.08 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guaranty or otherwise become directly or indirectly
liable with respect to (collectively, "INCUR") any Indebtedness
(including Acquired Debt) and the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock that is
Disqualified Stock; provided, however, that the Company may incur
Indebtedness or issue shares of Disqualified Stock and any of its
Restricted Subsidiaries may issue shares of preferred stock that is
Disqualified Stock if after giving effect to such issuance or
incurrence on a pro forma basis, the sum of (x) Indebtedness of the
Company and its Restricted Subsidiaries, on a consolidated basis, (y)
the liquidation value of outstanding preferred stock of Restricted
Subsidiaries and (z) the aggregate amount payable by the Company and
its Restricted Subsidiaries, on a consolidated basis, upon redemption
of Disqualified Stock to the extent such amount is not included in the
preceding clause (y) shall be less than the product of Annualized Pro
Forma EBITDA for the latest fiscal quarter for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued multiplied by 7.0, determined on a pro forma
basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may
be, at the beginning of such quarter.
(b) The foregoing limitations in Section 4.08(a) shall not
apply to:
(i) the incurrence by the Company or any Restricted Subsidiary
of Indebtedness pursuant to the Credit Facility;
(ii) the issuance by any Restricted Subsidiary of preferred
stock (other than Disqualified Stock) to the Company, any Restricted
Subsidiary of the Company or the holders of Equity Interests in any
Restricted Subsidiary on a pro rata basis to such holders;
(iii) the incurrence of Indebtedness or the issuance of
preferred stock by the Company or any of its Restricted Subsidiaries
the proceeds of which are (or the credit support provided by any such
Indebtedness is), in each case, used to finance the construction,
capital expenditure and working capital needs of a Cable Business
(including, without limitation, payments made pursuant to any License),
the acquisition of Cable Assets or the Capital Stock of a Qualified
Subsidiary;
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(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount not to exceed $100.0 million at any time;
(v) the incurrence by the Company or any Restricted Subsidiary
of any Permitted Acquired Debt;
(vi) the incurrence by the Company or any Subsidiary of
Indebtedness issued in exchange for, or the proceeds of which are used
to extend, refinance, renew, replace, or refund the Notes, the 2006
Notes, the 2009 Notes, Existing Indebtedness or Indebtedness referred
to in clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness
incurred pursuant to Section 4.08(a) hereof (the "REFINANCING
INDEBTEDNESS"); provided, however, that (1) the principal amount of,
and any premium payable in respect of, such Refinancing Indebtedness
shall not exceed the principal amount of Indebtedness so extended,
refinanced, renewed, replaced or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (2) the
Refinancing Indebtedness shall have (A) a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced or
refunded, and (B) a stated maturity no earlier than the stated maturity
of, the Indebtedness being extended, refinanced, renewed, replaced or
refunded; and (3) the Refinancing Indebtedness shall be subordinated in
right of payment to the Notes as and to the extent of the Indebtedness
being extended, refinanced, renewed, replaced or refunded;
(vii) the issuance of the Preferred Stock in lieu of payment
of cash interest on the Subordinated Debentures or the incurrence by
the Company of Indebtedness represented by the Subordinated Debentures
upon the exchange of the Preferred Stock in accordance with the
Certificate of Designations therefor;
(viii) Indebtedness under Exchange Rate Contracts, provided
that such Exchange Rate Contracts are related to payment obligations
under Existing Indebtedness or Indebtedness incurred under Section
4.08(a) or (b) hereof that are being hedged thereby, and not for
speculation and that the aggregate notional amount under each such
Exchange Rate Contract does not exceed the aggregate payment
obligations under such Indebtedness;
(ix) Indebtedness under Interest Rate Agreements, provided
that the obligations under such agreements are related to payment
obligations on Existing Indebtedness or Indebtedness otherwise incurred
pursuant to Section 4.08(a) or (b) hereof, and not for speculation;
(x) the incurrence of Indebtedness between the Company and any
Restricted Subsidiary, between or among Restricted Subsidiaries and
between any Restricted Subsidiary and other holders of Equity Interests
of such Restricted Subsidiary (or other Persons providing funding on
their behalf) on a pro rata basis and on substantially identical
principal financial terms; provided, however, that if any such
Restricted Subsidiary that is the payee of any such Indebtedness ceases
to be a Restricted Subsidiary or transfers such Indebtedness (other
than to the Company or a Restricted Subsidiary of the Company), such
events shall be deemed, in each case, to constitute the incurrence of
such Indebtedness by the Company or by a Restricted Subsidiary, as the
case may be, at the time of such event; and
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(xi) Indebtedness of the Company and/or any Restricted
Subsidiary in respect of performance bonds of the Company or any
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary received in the ordinary course of business in connection
with the construction or operation of a Cable Business.
(c) Any redesignation of a Non-Restricted Subsidiary as a
Restricted Subsidiary shall be deemed for purposes of this Section 4.08
to be an incurrence of Indebtedness by the Company and its Restricted
Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as
of the time of such redesignation to the extent such Indebtedness does
not already constitute Indebtedness of the Company or one of its
Restricted Subsidiaries.
SECTION 4.09 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on
account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (other than (x) dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or such
Restricted Subsidiary, (y) dividends or distributions payable to the
Company or any Wholly Owned Subsidiary of the Company, or (z) pro rata
dividends or pro rata distributions payable by a Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Subsidiary of the
Company);
(iii) voluntarily purchase, redeem or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes; or
(iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being
collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time
of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issuance Date (including Restricted Payments
permitted by clauses (ii) through (x) of Section 4.09(b)), is less than
the sum of (x) the difference between Cumulative EBITDA and 1.5 times
Cumulative Interest Expense plus (y) Capital Stock Sale Proceeds plus
(z) cash received by the Company or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which is or is required to
be repaid or returned to such Non-Restricted Subsidiary); provided,
however, that to the extent that any Restricted Investment that was
made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the amount credited pursuant to this
clause (z) shall be the lesser of (A) the cash received with respect to
such sale, liquidation or repayment of such Restricted Investment (less
the cost of such sale, liquidation or repayment, if any) and (B) the
initial amount of such Restricted Investment, in each case as
determined in good faith by the Company's Board of Directors.
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(b) The foregoing provisions in Section 4.09(a) shall not
prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment
would have complied with the provisions of this Indenture;
(ii) (x) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any Restricted
Subsidiary or (y) an Investment in any Person, in each case, in
exchange for, or out of the proceeds of, the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of other
Equity Interests (other than any Disqualified Stock) of the Company,
provided that the Company delivers to the Trustee:
(1) with respect to any transaction involving in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officer's Certificate certifying that such transaction is approved by a
majority of the directors on the Board of Directors; and
(2) with respect to any transaction involving in excess of
$25.0 million, an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by an
investment banking firm of national standing with high yield
experience, together with an Officer's Certificate to the effect that
such opinion complies with this clause (2);
(iii) Investments by the Company or any Restricted Subsidiary
in a Non-Controlled Subsidiary which (A) has no Indebtedness on a
consolidated basis other than Indebtedness incurred to finance the
purchase of equipment used in a Cable Business, (B) has no restrictions
(other than restrictions imposed or permitted by this Indenture or the
indentures governing the Other Qualified Notes or any other instrument
governing unsecured indebtedness of the Company which is pari passu
with the Notes) on its ability to pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries, (C)
is or will be a Cable Business and (D) uses the proceeds of such
Investment for constructing a Cable Business or the working capital
needs of a Cable Business;
(iv) the redemption, purchase, defeasance, acquisition or
retirement of Indebtedness that is subordinated to the Notes (including
premium, if any, and accrued and unpaid interest) made by exchange for,
or out of the proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of (A) Equity Interests of
the Company or (B) Refinancing Indebtedness permitted to be incurred
under Section 4.08 hereof;
(v) Investments by the Company or any Restricted Subsidiary in
a Non-Controlled Subsidiary which is or will be a Cable Business in an
amount not to exceed $100.0 million in the aggregate plus the sum of
(x) cash received by the Company or a Restricted Subsidiary from a
Non-Restricted Subsidiary (other than cash which s or is required to be
repaid or returned to such Non-Restricted Subsidiary) and (y) Capital
Stock Sale Proceeds (excluding the aggregate net sale proceeds to be
received upon conversion of the Convertible Subordinated Notes);
(vi) Investments by the Company or any Restricted Subsidiary
in Permitted Non-Controlled Assets;
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(vii) Investments by the Company or any Restricted Subsidiary
in SDN Limited, a joint venture organized to operate a digital
terrestrial television multiplex, in an amount not exceeding
(pound)11.4 million.
(viii) the extension by the Company or any Restricted
Subsidiary of trade credit to a Non-Restricted Subsidiary extended on
usual and customary terms in the ordinary course of business, provided
that the aggregate amount of such trade credit shall not exceed $25.0
million at any one time;
(ix) the payment of cash dividends on the Preferred Stock
accruing on or after February 15, 2004 or any mandatory redemption or
repurchase of the Preferred Stock, in each case, in accordance with the
Certificate of Designations therefor; and
(x) the exchange of all of the outstanding shares of Preferred
Stock for Subordinated Debentures in accordance with the Certificate of
Designations for the Preferred Stock.
(c) Any Investment in a Subsidiary (other than the issuance,
transfer or other conveyance of Equity Interests of the Company (or any
Capital Stock Sale Proceeds therefrom)) that is designated by the Board
of Directors as a Non-Restricted Subsidiary shall become a Restricted
Payment made on the date of such designation in the amount of the
greater of (x) the book value of such Subsidiary on the date such
Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market
value of such Subsidiary on such date as determined (A) in good faith
by the Board of Directors of such Subsidiary if such fair market value
is determined to be less than $25.0 million and (B) by an investment
banking firm of national standing with high yield underwriting
expertise if such fair market value is determined to be in excess of
$25.0 million.
(d) Not later than the fifth Business Day after making any
Restricted Payment (other than those referred to in sub-clause (viii)
of Section 4.09(b)), the Company shall deliver to the Trustee an
Officer's Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by
this Section 4.09 were computed, which calculations may be based upon
the Company's latest available financial statements.
SECTION 4.10 ASSET SALES.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to cause, make or suffer to exist any Asset
Sale, unless:
(i) no Default exists or is continuing immediately prior to
and after giving effect to such Asset Sale;
(ii) the Company (or the Restricted Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced for purposes of this Section
4.10 by a resolution of the Board of Directors set forth in an
Officer's Certificate delivered to the Trustee) of the assets sold or
otherwise disposed of; and
(iii) at least 80% of the consideration therefor received by
the Company or such Restricted Subsidiary is in the form of (w) Cash
Equivalents, (x) Replacement Assets, (y) publicly traded Equity
Interests of a Person who is, directly or indirectly, engaged primarily
in one or more Cable Businesses; provided, however, that the
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Company or such Restricted Subsidiary shall Monetize such
Equity Interests by sale to one or more Persons (other than to the
Company or a Subsidiary thereof) at a price not less than the fair
market value thereof within 180 days of the consummation of such Asset
Sale, or (z) any combination of the foregoing clauses (w) through (y);
provided, however, that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet
or in the notes thereto) of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets and (y)
any notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are within five
Business Days converted by the Company or such Restricted Subsidiary
into cash, shall be deemed to be Cash Equivalents (to the extent of the
Cash Equivalents received in such conversion) for purposes of this
clause (iii).
(b) Within 360 days after any Asset Sale, the Company (or the
Restricted Subsidiary, as the case may be) shall cause the Net Proceeds
from such Asset Sale:
(i) to be used to permanently reduce Indebtedness of a
Restricted Subsidiary; or
(ii) to be invested or reinvested in Replacement Assets.
Pending final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture or the
indentures for the Other Qualified Notes.
Any Net Proceeds from any Asset Sale that are not used or
reinvested as provided in the preceding sentence constitute "EXCESS PROCEEDS."
When the aggregate amount of Excess Proceeds exceeds $15 million, the Company
shall make an offer (an "ASSET SALE OFFER") to all holders of Notes and Other
Qualified Notes to purchase the maximum principal amount of Notes and Other
Qualified Notes (determined on a pro rata basis according to the accreted value
or principal amount, as the case may be, of the Notes and the Other Qualified
Notes and in accordance with Section 3.09(g)(i)) that may be purchased out of
the Excess Proceeds (x) with respect to the Other Qualified Notes, based on the
terms set forth in the indenture related to each issue of the Other Qualified
Notes and (y) with respect to the Notes, at an offer price in cash in an amount
equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the date fixed for the closing of such offer (or, in
the case of repurchases of Notes prior to November 15, 2004, at a purchase price
equal to 100% of the Accreted Value thereof as of the date fixed for the closing
of such offer), in accordance with the procedures set forth in Section 3.09
hereof. To the extent that the aggregate principal amount or accreted value, as
the case may be, of Notes and Other Qualified Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount or
accreted value, as the case may be, of Notes and Other Qualified Notes
surrendered by holders thereof exceeds the amount of Excess Proceeds, then such
remaining Excess Proceeds shall be allocated pro rata according to accreted
value or principal amount, as the case may be, to the Notes and each issue of
the Other Qualified Notes and in accordance with Section 3.09(g)(ii), and the
Trustee shall select the Notes to be purchased from the amount allocated to the
Notes on the basis set forth in Section 3.09(e) hereof. Upon completion of such
offers to purchase each of the Notes and the Other Qualified Notes, the amount
of Excess Proceeds will be reset at zero.
(c) Notwithstanding the provisions of Sections 4.10(a) and
(b): the Company and its Subsidiaries may:
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(i) sell, lease, transfer, convey or otherwise dispose of
assets or property acquired after October 14, 1993, by the Company or
any Subsidiary in a sale-and-leaseback transaction so long as the
proceeds of such sale are applied within five Business Days to
permanently reduce Indebtedness of a Restricted Subsidiary or if there
is no such Indebtedness or such proceeds exceed the amount of such
Indebtedness then such proceeds or excess proceeds are reinvested in a
Replacement Assets within 360 days after such sale, lease, transfer,
conveyance or disposition;
(ii) (x) swap or exchange assets or property with a Cable
Controlled Subsidiary or (y) issue, sell, lease, transfer, convey or
otherwise dispose of equity securities of any of the Company's
Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x) and
(y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company after such transaction is equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding such transaction; provided, however, that if the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding such transaction is 6:1 or less, then the ratio
of Indebtedness to Annualized Pro Forma EBITDA of the Company may be
0.5 greater than such ratio immediately preceding such transaction and
(B) either (I) the assets so contributed consist solely of a license to
operate a Cable Business and the Net Households covered by all of the
licenses to operate cable and telephone systems held by the Company and
its Restricted Subsidiaries immediately after and giving effect to such
transaction equals or exceeds the number of Net Households covered by
all of the licenses to operate cable and telephone systems held by the
Company and its Restricted Subsidiaries immediately prior to such
transaction or (II) the assets so contributed consist solely of Cable
Assets and the value of the Capital Stock received, immediately after
and giving effect to such transaction, as determined by an investment
banking firm of recognized standing with knowledge of the Cable
Business, equals or exceeds the value of Cable Assets exchanged for
such Capital Stock; or
(iii) issue, sell, lease, transfer, convey or otherwise
dispose of Equity Interests (other than Disqualified Stock) of the
Company (or any Capital Stock Sale Proceeds therefrom) to any Person
(including Non-Restricted Subsidiaries).
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or amend any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless:
(a) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Subsidiary than those that
could have been obtained in a comparable transaction by the Company or
such Subsidiary with an unrelated Person and
(b) the Company delivers to the Trustee:
(i) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1.0 million or any series of Affiliate
Transactions with an Affiliate involving aggregate payments in excess
of $1.0 million, a resolution of the Board of Directors set forth in an
Officer's Certificate certifying that such Affiliate Transaction
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complies with Section 4.11 (a) and such Affiliate Transaction is
approved by a majority of the disinterested directors on the Board of
Directors; and
(ii) with respect to any Affiliate Transaction or any series
of Affiliate Transactions involving aggregate payments in excess of
$25.0 million, an opinion as to the fairness to the Company or such
Subsidiary from a financial point of view issued by an investment
banking firm of national standing with high yield experience together
with an Officer's Certificate to the effect that such opinion complies
with this clause (ii); provided, however, that notwithstanding the
foregoing provisions, the following shall not be deemed to be Affiliate
Transactions:
(1) any employment agreement entered into by the Company or
any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or its predecessor or
such Subsidiary;
(2) transactions between or among the Company and/or its
Restricted Subsidiaries;
(3) transactions permitted by the provisions of Section 4.09
hereof;
(4) Liens permitted under Section 4.07 hereof which are
granted by the Company or any of its Subsidiaries to an unrelated
Person for the benefit of the Company or any other Subsidiary of the
Company;
(5) any transaction pursuant to an agreement in effect on the
Issuance Date;
(6) the incurrence of Indebtedness by a Restricted Subsidiary
where such Indebtedness is owed to the holders of the Equity Interests
of such Restricted Subsidiary on a pro rata basis and on substantially
identical principal financial terms;
(7) management, operating, service or interconnect agreements
entered into in the ordinary course of business with any Cable Business
in which the Company or any Restricted Subsidiary has an Investment and
which is not a Cable Controlled Subsidiary (and of which no Affiliate
of the Company is an Affiliate other than as a result of such
Investment); and
(8) any tax sharing agreement.
SECTION 4.12 DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (A) on its Capital Stock or (B) with
respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any indebtedness owed to the Company or any of its
Subsidiaries, or
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(b) make loans or advances to the Company or any of its
Subsidiaries, or
(c) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(i) Existing Indebtedness as in effect on the Issuance Date;
(ii) this Indenture, the Notes, the indentures relating to the
2006 Notes and the 2009 Notes, the 2006 Notes and the 2009 Notes;
(iii) any agreement covering or relating to Indebtedness
permitted to be incurred under Section 4.08(b)(i), (ii), (iii), (iv),
(v), (viii) or (ix) hereof (but only, in the case of Section
4.08(b)(viii) or (ix), to the extent contemplated by the then-existing
Credit Facility), provided that the provisions of such agreement permit
any action referred to in clause (a) above in aggregate amounts
sufficient to enable the payment of interest and principal and
mandatory repurchases pursuant to the terms of this Indenture and the
Notes, but provided further that: (x) any such agreement may
nevertheless encumber, prohibit or restrict any action referred to in
clause (a) above if an event of default under such agreement has
occurred and is continuing or would occur as a result of any such
action; and (y) any such agreement may nevertheless contain (I)
restrictions limiting the payment of dividends or the making of any
other distributions to all or a portion of excess cash-flow (or any
similar formulation thereof) and (II) subordination provisions
governing Indebtedness owed to the Company or any Restricted
Subsidiary;
(iv) applicable law;
(v) any instrument governing Indebtedness or Capital Stock of
a Person acquired by the Company or any of its Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided that the EBITDA
of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of this Indenture;
(vi) customary nonassignment provisions in leases entered into
in the ordinary course of business and consistent with past practices;
(vii) provisions of joint venture or stockholder agreements,
so long as such provisions are determined by a resolution of the Board
of Directors to be, at the time of such determination, customary for
such agreements;
(viii) with respect to clause (c) above, purchase money
obligations for property acquired in the ordinary course of business or
the provisions of any agreement with respect to any Asset Sale (or
transaction which, but for its size, would be an Asset Sale), solely
with respect to the assets being sold; or
(ix) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Refinancing
Indebtedness are determined by a resolution of the Board of Directors
to be no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
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SECTION 4.13 CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control Triggering
Event, each Holder of Notes shall have the right to require the Company
to repurchase all or any part (equal to euro 1,000 or an integral
multiple thereof) of such Holder's Notes pursuant to the offer
described in Section 3.09 hereof (the "PURCHASE OFFER") at a purchase
price equal to 101% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (or, in the
case of repurchases of Notes prior to November 15, 2004, at a purchase
price equal to 101% of the Accreted Value thereof as of the date fixed
for purchase) (the "CHANGE OF CONTROL PAYMENT").
(b) Within 40 days following any Change of Control Triggering
Event, the Company shall mail to each Holder the notice provided by
Section 3.09(e) and if and so long as the Notes are listed on the
Luxembourg Stock Exchange publish a notice in one leading newspaper
with circulation in Luxembourg.
SECTION 4.14 PAYMENT OF ADDITIONAL AMOUNTS.
At least 10 days prior to the first date on which payment of principal
and any premium or interest on the Notes is to be made, and at least 10 days
prior to any subsequent such date if there has been any change with respect to
the matters set forth in the Officer's Certificate described in this Section
4.14, the Company shall furnish the Trustee and the Paying Agent, if other than
the Trustee, with an Officer's Certificate instructing the Trustee and the
Paying Agent whether the Company is obligated to pay Additional Amounts (as
defined in Section 3 of the Initial Notes or Section 2 of the Exchange Notes)
with respect to such payment of principal, or of any premium or interest on the
Notes. If the Company will be obligated to pay Additional Amounts with respect
to such payment, then such Officer's Certificate shall specify by country the
amount, if any, required to be withheld on such payments to such Holders and the
Company will pay to the Trustee or the Paying Agent such Additional Amounts. The
Company shall indemnify the Trustee and the Paying Agent for, and hold them
harmless against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officer's Certificate
furnished to them pursuant to this Section 4.14.
Whenever in this Indenture there is mentioned, in any context, the
payment of principal (and premium, if any), Offer Amount, interest or any other
amount payable under or with respect to any Note such mention shall be deemed to
include mention of the payment of Additional Amounts provided for in this
Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange
Notes) to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to the provisions of this Section
4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and
express mention of the payment of Additional Amounts (if applicable) in any
provisions hereof shall not be construed as excluding Additional Amounts in
those provisions hereof where such express mention is not made (if applicable).
ARTICLE V.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another corporation, Person or
entity unless:
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(a) the Company is the surviving corporation or the entity or
the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United Kingdom,
the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands or of the United States, any state thereof or the District of
Columbia;
(b) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made assumes all the Obligations
(including the due and punctual payment of Additional Amounts if the
surviving corporation is a corporation organized or existing under the
laws of the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands) of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Notes and this Indenture;
(c) immediately after such transaction no Default or Event of
Default exists;
(d) the Company or any entity or Person formed by or surviving
any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made
will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal
to or less than the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding the transaction; provided,
however, that if the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such transaction is 6:1 or
less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of
the Company may be 0.5 greater than such ratio immediately preceding
such transaction; and
(e) such transaction would not result in the loss of any
material authorization or Material License of the Company or its
Subsidiaries.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company herein; provided, however, that
the predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Notes.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest (and
Additional Amounts, if applicable) on any Note when the same becomes
due and payable and the Default continues for a period of 30 days after
the date due and payable;
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(b) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon
redemption or otherwise;
(c) the Company fails to observe or perform any covenant or
agreement contained in Section 4.08, 4.09, or 4.13 hereof;
(d) the Company fails to observe or perform any other covenant
or agreement contained in this Indenture or the Notes, required by any
of them to be performed and the Default continues for a period of 60
days after notice from the Trustee to the Company or from the Holders
of 25% in aggregate principal amount at maturity of the then
outstanding Notes to the Company and the Trustee stating that such
notice is a "Notice of Default";
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any Restricted
Subsidiary (or the payment of which is guaranteed by the Company or any
Restricted Subsidiary), whether such Indebtedness or guarantee now
exists or is created after the Issuance Date, which default:
(i) is caused by a failure to pay when due principal of or
interest on such Indebtedness within the grace period provided for in
such Indebtedness (which failure continues beyond any applicable grace
period) (a "PAYMENT DEFAULT"); or
(ii) results in the acceleration of such Indebtedness prior to
its express maturity
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there is a Payment Default or the maturity of
which has been so accelerated, aggregates $10.0 million or more;
(f) a final judgment or final judgments (other than any
judgment as to which a reputable insurance company has accepted full
liability) for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any Restricted Subsidiary
of the Company which remains undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that
the aggregate of all such judgments exceeds $5.0 million;
(g) the Company or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it
in an involuntary case in which it is the debtor;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally is unable to pay its debts as the same become
due;
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(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Material
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any Material
Subsidiary or for all or substantially all of its property; or
(iii) orders the liquidation of the Company or any Material
Subsidiary, and the order or decree remains unstayed and in effect for
60 days; and
(i) the revocation of a Material License.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors or the
protection of creditors. The term "CUSTODIAN" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (g) and (h) of Section 6.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount at maturity of the then outstanding Notes by notice to the Company and
the Trustee, may declare all the Notes to be due and payable. Upon such
declaration, the principal (or the Accreted Value, if prior to November 15,
2004) of, premium, if any, and interest (if on or after November 15, 2004) on,
the Notes shall be due and payable immediately. If an Event of Default specified
in clause (g) or (h) of Section 6.01 hereof occurs, such an amount shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. The Holders of a majority in
principal amount at maturity of the then outstanding Notes by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration. In the case of any Event of
Default pursuant to the provisions of Section 6.01 occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes), an
equivalent premium shall, upon demand of the Holders of at least 25% in
principal amount at maturity of the then outstanding Notes delivered to the
Company and the Trustee, also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Notes contained to
the contrary notwithstanding. If an Event of Default occurs prior to November
15, 2004, by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to November 15, 2004, pursuant to Section 7 of the
Initial Notes (Section 6 in the case of the Exchange Notes), then the premium
payable for purposes of this paragraph for each of the years beginning on
November 15 of the years (November 24 in the case of 1999) set forth below
shall, subject to the foregoing demand, be as set forth in the following table
expressed as a percentage of the amount that would otherwise be due pursuant to
this Section 6.02 hereof but for the provisions of this sentence.
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999.......................................... 111.500%
2000.......................................... 110.350%
2001.......................................... 109.200%
2002.......................................... 108.050%
2003.......................................... 106.900%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount at maturity of the then
outstanding Notes by notice to the Trustee may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal or Accreted Value of, or interest on any
Note. When a Default or Event of Default is waived, it is cured and ceases; but
no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
The Holders of a majority in principal amount at maturity of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, is unduly prejudicial to the rights
of other Holders, or would involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount at
maturity of the then outstanding Notes make a request to the Trustee
to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
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(e) during such 60-day period the Holders of a majority in
principal amount at maturity of the then outstanding Notes do not give
the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder made pursuant to this
Section.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid on the Notes and interest on overdue principal and
interest and such further amount as shall be sufficient to cover the costs and,
to the extent lawful, expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest (and Additional Amounts, if applicable), ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders made pursuant to this Section.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in
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the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit by
the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by
Holders of more than 10% in principal amount at maturity of the then outstanding
Notes.
ARTICLE VII.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i)
the Trustee need perform only those duties that are specifically set
forth in this Indenture and no others and (ii) in the absence of bad
faith on its part, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture and to confirm the
correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect
of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be
liable for any error of judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts and (iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05 hereof.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel, or both. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officer's Certificate or Opinion of
Counsel.
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(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be charged with knowledge of any
Event of Default under subsection (c), (d), (e), (f) or (i) (and
subsection (a) or (b) if the Trustee does not act as Paying Agent) of
Section 6.01 or of the identity of any Material Subsidiary referred to
in clause (ii) of the definition thereof unless either (1) a Trust
Officer of the Trustee assigned to its Corporate Trustee Administration
Department shall have actual knowledge thereof, or (2) the Trustee
shall have received notice thereof in accordance with Section 10.02
hereof from the Company or any Holder.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Notes other
than its authentication or for compliance by the Company with the Registration
Rights Agreement.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 10.10, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it. Such disbursements and expenses
may include the reasonable disbursements, compensation and expenses of the
Trustee's agents and counsel.
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The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
All amounts owing to the Trustee under this Section shall be payable by
the Company in United States dollars.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount at maturity of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Company. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof,
unless the Trustee's duty to resign is stayed as provided in TIA
Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount at maturity of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount at maturity of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee fails to comply with Section 7.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08 hereof, the Company's obligations under Section 7.07 hereof
shall continue for the benefit of the retiring trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall always have a
combined capital and surplus as stated in Section 10.11 hereof. The Trustee is
subject to TIA Section 310(b). The following indentures shall be deemed to be
specifically described herein for the purposes of clause (i) of the first
proviso contained in TIA Section 310(b): (a) indenture, dated as of April 20,
1995, between the Company and The Chase Manhattan Bank, as trustee, relating to
the 12 3/4% Notes, as amended, (b) indenture, dated as of January 30, 1996,
between the Company and The Chase Manhattan Bank, as trustee, relating to the
11 1/2% Deferred Coupon Notes, as amended, (c) indenture, dated as February 12,
1997, between the Company and The Chase Manhattan Bank, as trustee, relating to
the 10% Notes, as amended, (d) indenture dated as of March 13, 1998, between the
Company and The Chase Manhattan Bank, as trustee, relating to the Company's
9 1/2% Notes, (e) indenture, dated as of March 13, 1998, between the Company and
The Chase Manhattan Bank, as trustee, relating to the Company's 10 3/4% Notes,
(f) indenture, dated as of March 13, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to Company's the 9 3/4% Notes, (g)
indenture, dated as of November 2, 1998, between the Company and The Chase
Manhattan Bank, as trustee, relating to the Company's 11 1/2% Notes, (h)
indenture dated as of November 6, 1998 between the Company and The Chase
Manhattan Bank, as Trustee, relating to the 12 3/8% Deferred Coupon Notes, (i)
indenture dated as of April 14, 1999 between the Company and The Chase Manhattan
Bank, as Trustee, relating to the Company's 1999 9 3/4 Notes, (j) indenture
dated as of November 24, 1999 between the Company and The Chase Manhattan Bank,
as Trustee, relating to the Company's 2006 Notes, and (k) indenture dated as of
November 24, 1999 between the Company and The Chase Manhattan Bank, as Trustee,
relating to the Company's 2009 Notes.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE VIII.
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
SECTION 8.02 OPTION TO EFFECT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officer's Certificate, at any time, elect to have
this Section 8.02 be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Section. Upon the Company's election to have
this Section 8.02 apply to all the outstanding Notes, the Company shall, subject
to the satisfaction of the conditions set forth in the next paragraph, be deemed
to have been discharged from its obligations with respect to all outstanding
Notes on the date such conditions are satisfied (hereinafter, "DEFEASANCE"). For
this purpose, Defeasance means that the Company shall be deemed to have paid and
discharged the entire Obligations represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.03 hereof and the other Sections of this Indenture referred to in clauses (a)
and (b) below, and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in the following paragraph, payments in
respect of the principal of (or, if applicable, all amounts payable in respect
of Accreted Value) and interest on such Notes when such payments are due; (ii)
the Company's obligations with respect to such Notes under Article II hereof;
(iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith; and (iv) this Article
VIII.
In order to exercise Defeasance:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee or the Paying Agent, at any time prior to
the maturity date of the Notes, in trust, for the benefit of the
Holders, pursuant to an irrevocable trust and security agreement in
form satisfactory to the Trustee, as trust funds in trust, legal tender
in the countries constituting the European Monetary Union sufficient,
EEA Government Obligations, the principal of and interest on which will
be sufficient, or a combination thereof sufficient, in the opinion of a
nationally recognized firm of independent public accountants, expressed
in a written certification thereof (in form satisfactory to the
Trustee) to pay the principal of (or, if applicable, payments in
respect of Accreted Value), premium, if any, and interest, if any, on
the outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal or
installment of principal of (or, if applicable, payments in respect of
Accreted Value), premium, if any, and interest, if any, on the
outstanding Notes;
(b) the Company shall have delivered to the Trustee, an
Opinion of Counsel (which counsel may be an employee of the Company)
reasonably acceptable to the Trustee confirming that: (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issuance Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income,
gain or loss for
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federal income tax purposes as a result of such Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Defeasance
had not occurred;
(c) no Event of Default shall have occurred and be continuing
on the date of such Defeasance (other than an Event of Default
resulting from or related to the incurrence of Indebtedness, the
proceeds of which are to be applied to such deposit) or, insofar as
Sections 6.01(g) and (h) hereof are concerned, at any time in the
period ending on the 91st day after the date of deposit (or greater
period of time in which any such deposit of trust funds may remain
subject to the effect of any Bankruptcy Law insofar as those apply to
the deposit by the Company);
(d) such Defeasance shall not result in a breach or violation
of, or constitute a default under, any material agreement or instrument
(other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(e) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit
(or such greater period referred to in (c) above), the trust funds will
not be subject to the effect of any applicable Bankruptcy Law;
(f) the Company shall have delivered to the Trustee an
Officer's Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over any
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others;
(g) the deposit shall not result in the Company, the Trustee
or the trust fund established pursuant to (a) above being subject to
regulation under the Investment Company Act of 1940, as amended;
(h) Holders of the Notes will have a valid, perfected and
unavoidable (under applicable Bankruptcy Law), subject to the passage
of time referred to clause (e) above, first priority security interest
in the trust funds; and
(i) the Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel (subject to customary
exceptions), each stating that all conditions precedent provided for or
relating to the Defeasance have been complied with.
SECTION 8.03 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust, money (in the form of legal tender in
the countries constituting the European Monetary Union) or EEA Government
Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply
the deposited money (in the form of legal tender in the countries constituting
the European Monetary Union) and the money from EEA Government Obligations
through the Paying Agent and in accordance with this Indenture to the payment of
principal and interest, if any, on the Notes.
SECTION 8.04 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal (or, if applicable, payments
in respect of Accreted Value) or interest
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that remains unclaimed for two years after the date upon which such payment
shall have become due; provided, however, that the Company shall have first
caused notice of such payment to the Company to be mailed to each Holder
entitled thereto no less than 30 days prior to such payment. After payment to
the Company, the Trustee and the Paying Agent shall have no further liability
with respect to such money and Holders entitled to the money must look to the
Company for payment as general creditors unless any applicable abandoned
property law designates another Person.
SECTION 8.05 REINSTATEMENT.
If (i) the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.03 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application and (ii) the Holders of at least a majority in principal amount
at maturity of the then outstanding Notes so request by written notice to the
Trustee, the Company's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.02 hereof until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 8.03 hereof or such request is revoked
by such Holders; provided, however, that if the Company makes any payment of
interest on or principal (or, if applicable, payments in respect of Accreted
Value) of any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 5.01 hereof;
(c) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(d) to make any change that does not adversely affect the
interests hereunder of any Holder;
(e) to qualify the Indenture under the TIA or to comply with
the requirements of the SEC in order to maintain the qualification of
the Indenture under the TIA; or
(f) to provide for the issuance of Additional Notes in
accordance with the limitations set forth in this Indenture.
SECTION 9.02 WITH CONSENT OF HOLDERS.
Subject to Section 6.07 hereof, the Company and the Trustee may amend
or supplement this Indenture or the Notes with the written consent of the
Holders of at least a majority in principal amount at maturity of the then
outstanding Notes. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in principal amount at maturity of the Notes then outstanding
(including Additional Notes, if any) may also waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment, supplement
or waiver under this Section may not:
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(a) reduce the amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter the provisions of Sections 7 and 8 of the Initial
Note and Sections 6 and 7 of the Exchange Note (other than provisions
relating to the covenants described under Sections 4.10 and 4.13);
(c) alter the manner of calculating the Accreted Value of any
Note or reduce the rate of or change the time for payment of interest
on any Note;
(d) waive a default in the payment of the principal of (or, if
applicable, payments in respect of Accreted Value), or interest, if
any, on, any Note (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount at
maturity of the Notes and a waiver of the payment default that resulted
from such acceleration);
(e) except as contemplated by Section 10.07(e), make any Note
payable in money other than that stated in the Note;
(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption payment with respect to any Note; or
(h) make any change in the foregoing amendment and waiver
provisions of this Article 9.
To secure a consent of the Holders under this Section 9.02, it shall
not be necessary for the Holders to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Holders a notice briefly describing the
amendment or waiver.
Section 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his Note or portion of a Note if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officer's Certificate
certifying that the Holders of the requisite principal amount at maturity of
Notes have consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such
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Persons continue to be Holders after such record date. No consent shall be valid
or effective for more than 90 days after such record date unless consents from
Holders of the principal amount at maturity of Notes required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Holder, unless it is of the type described in any of clauses (a)
through (h) of Section 9.02 hereof. In such case, the amendment or waiver shall
bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Note.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make such notation on a Note or to issue a new Note as
aforesaid shall not affect the validity and effect of such amendment or waiver.
SECTION 9.06 TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee may, but need not, sign any supplemental indenture that adversely
affects its rights.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be incorporated into this Indenture (or, prior to the registration
of the Notes pursuant to the Registration Rights Agreement, would be required to
be incorporated into this Indenture if it were qualified under the TIA), and
shall, to the extent applicable, be governed by such provisions. If any
provision of this Indenture limits, qualifies, or conflicts with another
provision which is required (or would be so required) to be incorporated in this
Indenture by the TIA, the incorporated provision shall control.
SECTION 10.02 NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail to the other's address stated in Section 10.10 hereof. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first class
mail to his address shown on the register kept by the Registrar. Failure to mail
a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
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All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officer's Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 4.03)
shall include:
(a) a statement that the Person signing such certificate or
rendering such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting of,
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07 LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York, USA or London, United Kingdom are not
required to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If any other
operative date for
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purposes of this Indenture shall occur on a Legal Holiday then for all purposes
the next succeeding day that is not a Legal Holiday shall be such operative
date.
SECTION 10.08 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the Notes
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
SECTION 10.09 COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 10.10 VARIABLE PROVISIONS.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ended on December 31, 1999.
The reporting date for Section 7.06 hereof is March 15, of each year.
The first reporting date is March 15, 2000.
The Trustee shall always have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and
Secretary
The Trustee's address is:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Capital Markets Fiduciary Services
SECTION 10.11 GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE
AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
56
<PAGE> 62
SECTION 10.12 RIGHTS OF THE REGISTRAR AND PAYING AGENT.
In acting as Registrar or Paying Agent hereunder, The Chase Manhattan
Bank (London) and Chase Manhattan Bank Luxembourg S.A. shall have the benefits
and protections afforded to the Trustee hereunder, including those afforded
under Article VII and Sections 10.04 and 10.05 (except to the extent that such
benefits and protections are made expressly inapplicable to the Registrar or the
Paying Agent).
SECTION 10.13 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.14 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 10.15 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.16 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
57
<PAGE> 63
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
NTL COMMUNICATIONS CORP.
By: /s/ Richard J. Lubasch
_________________________________
Name: Richard J. Lubasch
Title: Executive Vice President,
General Counsel and Secretary
indenture signature page
<PAGE> 64
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Robert S. Peschler
_______________________________
Name: Robert S. Peschler
Title: Assistant Vice President
indenture signature page
<PAGE> 65
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") [,/OR] EUROCLEAR
SYSTEM ("EUROCLEAR"), OR CEDELBANK, S.A. ("CEDELBANK")1 TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR [OR
CEDELBANK] (AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [,/OR] EUROCLEAR
[OR CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CHASE
NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC [,/OR] EUROCLEAR [OR CEDELBANK] OR TO
CUSTODIANS THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [,/OR] EUROCLEAR
[OR CEDELBANK] OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR
NOMINEES THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Rule 144A Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
[Regulation S Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
_______________________________
1 Reference to Cedelbank should only be included in the Regulation S Global
Note.
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<PAGE> 66
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN
OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES.
[Original Issue Discount Legend]
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING
THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE.
THE ISSUE DATE OF THIS NOTE IS NOVEMBER 24, 1999. THE ISSUE PRICE OF THIS NOTE
IS euro573.33 PER euro1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE
IS ISSUED WITH euro426.67 OF ORIGINAL ISSUE DISCOUNT PER euro1000.00 OF INITIAL
PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS 11 1/2%.
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<PAGE> 67
No. ________
euro ________
CINS No.[ ] /ISIN No. [ ] /CUSIP No. [__]
11 1/2% SENIOR DEFERRED COUPON NOTE DUE 2009
NTL Communications Corp., a Delaware corporation (the "COMPANY"),
promises to pay to __________________________ or registered assigns, the
principal sum of ____________________ euro [____________] [,or such other amount
as is indicated on Schedule A hereof*,] on November 15, 2009, subject to the
further provisions of this Note set forth on the reverse hereof which further
provisions shall for all purposes have the same effect as if set forth at this
place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2005
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: _____________________________
NTL COMMUNICATIONS CORP.
by: ________________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/2% Senior
Deferred Coupon Notes due 2009
described in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:______________________________________
Authorized Officer
_______________________________
* Applicable to Global Notes Only
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<PAGE> 68
[FORM OF REVERSE OF INITIAL NOTE]
NTL COMMUNICATIONS CORP.
11 1/2% Senior Deferred Coupon Note due 2009
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 11 1/2% Senior Deferred Coupon Notes due November
15, 2009 (the "NOTES"). The Notes are being issued at a discount from their
principal amount and will accrete (in accordance with the definition of Accreted
Value contained in the Indenture) at a rate of 11 1/2%, compounded semiannually,
to an aggregate principal amount of euro210,000,000 by November 15, 2004. The
Company promises to pay interest on the Notes in cash semiannually on each May
15 and November 15, commencing on May 15, 2005, to Holders of record on the
immediately preceding May 1 and November 1, respectively, at the rate of 11 1/2%
per annum. Interest on the Notes will accrue from the most recent date to which
interest has been paid on the Notes, or if no interest has been paid, from
November 15, 2004. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, or overdue Accreted Value at the interest or accretion rate
borne by the Notes, compounded semiannually, and it shall pay interest on
overdue installments of interest (without regard to any applicable grace period)
at the same interest rate compounded semiannually. Any interest paid on this
Note shall be increased to the extent necessary to pay Additional Amounts as set
forth in this Note.
2. Special Interest. The Holder of this Note is entitled to the
benefits of the Registration Rights Agreement relating to the Notes, (the
"REGISTRATION RIGHTS AGREEMENT").
In the event that either (a) we fail to file the Exchange Registration
Statement or the Shelf Registration Statement (as such terms are defined in the
Registration Rights Agreement) on or before the date specified for such filing
in the Registration Rights Agreement, (b) the Exchange Registration Statement is
not declared effective within 270 days after the closing of the sale of the
Notes or the Shelf Registration Statement is not declared effective within 270
days from the date such Shelf Registration Statement is filed, (c) we fail to
complete the Exchange Offer within the specified time frame, or (d) the Exchange
Registration Statement or the Shelf Registration Statement is filed and declared
effective but is thereafter either withdrawn or becomes subject to an effective
stop order suspending the effectiveness (except as specifically permitted in the
Registration Rights Agreement) without being succeeded immediately by an
additional registration statement which becomes effective, then we will pay
special interest pursuant to provisions of the Registration Rights Agreement and
the Notes to each holder of the Notes. Special interest will accrue from (i) the
date specified for such filing, in the case of clause (a) above, (ii) the date
specified for effectiveness in the case of clause (b) above, (iii) the date
specified for completion of the Exchange Offer, in the case of clause (c) above,
or (iv) the date such Exchange Offer Registration Statement or Shelf
Registration Statement ceases to be effective, in the case of clause (d) above
(each such period referred to in clauses (i) through (iv) above an "Accrual
Period"), at a rate per annum equal to 0.25% for the first 90 days of the
Accrual Period; 0.50% for the second 90 days of the Accrual Period; 0.75% for
the third 90 days of the Accrual Period and 1.0% for the remaining portion of
the Accrual Period of the Accreted Value of the Notes, determined daily. In each
case such additional interest will be payable in cash semiannually in arrears on
each November 15 and May 15, commencing May 15, 2000, to Holders of record on
the immediately preceding May 1 and November 1, respectively.
3. Additional Amounts. This Section 3 shall apply only in the event
that the Company becomes, or a successor to the Company is, a corporation
organized or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by
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law. If any deduction or withholding for or on account of any present or future
taxes, assessments or other governmental charges of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any
political subdivision or taxing authority thereof or therein) shall at any time
be required in respect of any amounts to be paid by the Company under this Note,
the Company shall pay or cause to be paid such additional amounts ("ADDITIONAL
AMOUNTS") as may be necessary in order that the net amounts received by a Holder
of this Note after such deduction or withholding shall be not less than the
amounts specified in this Note to which the Holder of this Note is entitled;
provided, however, that the Company shall not be required to make any payment of
Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the
extent such tax, assessment or other governmental charge would not have
been imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, nominee, trust, partnership
or corporation), other than the holding of this Note or the receipt of
amounts payable in respect of this Note, and the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands
(or any political subdivision or taxing authority thereof or therein)
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged
in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of this Note (where
presentation is required) for payment on a date more than 30 days after
the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later,
except to the extent that the Holder would have been entitled to
Additional Amounts had this Note been presented on the last day of such
period of 30 days;
(b) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure to comply by the Holder of
this Note or, if different, the beneficial owner of the interest
payable on this Note, with a timely request of the Company addressed to
such Holder or beneficial owner to provide information, documents or
other evidence concerning the nationality, residence, identity or
connection with the taxing jurisdiction of such Holder or beneficial
owner which is required or imposed by a statute, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or governmental
charge;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which
is collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or
exchange of a Note;
(e) any tax, assessment or other governmental charge
required to be withheld by any Paying Agent from any payment of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a Note, if such payment can be made, and is in
fact made, without such withholding by any other Paying Agent located
inside the United States;
(f) any tax, assessment or other governmental charge imposed
on a Holder that is not the beneficial owner of a Note to the extent
that the beneficial owner would not have been
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<PAGE> 70
entitled to the payment of any such Additional Amounts had the
beneficial owner directly held the Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f)
above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 3.
4. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments (or, if applicable, payments with respect to
Accreted Value). The Company will pay principal (or, if applicable, payments
with respect to Accreted Value), premium, if any, and interest in money of the
European Monetary Union that at the time of payment is legal tender for payment
of public and private debts. However, the Company may pay principal, premium,
(or, if applicable, payments with respect to Accreted Value) if any, and
interest by check payable in such money. It may mail an interest check to a
holder's registered address. If a Holder so requests, principal (or, if
applicable, payments with respect to Accreted Value), premium, if any, and
interest may be paid by wire transfer of immediately available funds to an
account previously specified in writing by such Holder to the Company and the
Trustee.
5. Paying Agent and Registrar. The Chase Manhattan Bank (London) will
act as Paying Agent and Registrar in London. The Trustee will act as Paying
Agent and Registrar in the City of New York, New York. Chase Manhattan Bank
Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as
long as the Notes are listed on the Luxembourg Stock Exchange. The Company may
change any Paying Agent or Registrar without prior notice. The Company or any of
its Affiliates may act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated as
of November 24, 1999 (the "INDENTURE"), between the Company and The Chase
Manhattan Bank, as Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to, and qualified by, all such terms, certain
of which are summarized hereon, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes initially issued by the
Company on the date of the Indenture are unsecured general obligations of the
Company limited to euro210,000,000 in aggregate principal amount at maturity.
Additional Notes may be issued in accordance with the terms of the Indenture.
7. Optional Redemption. Except as provided in Section 8 hereof, the
Notes are not redeemable at the Company's option prior to November 15, 2004.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount
at maturity) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 15 of the years indicated below:
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004..................................... 105.750%
2005..................................... 103.833%
2006..................................... 101.917%
2007 and thereafter...................... 100.000%
</TABLE>
8. Optional Tax Redemption. (a) The Notes may be redeemed at the option
of the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption (or,
in the case of redemption of the Notes prior to November 15, 2004, at a
redemption price equal to 100% of the Accreted Value thereof as of the date of
redemption) if after the date on which Section 3 of this Note becomes applicable
(the "RELEVANT DATE") there has occurred any change in or amendment to the laws
(or any regulations or official rulings promulgated thereunder) of the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands (or any political subdivision or taxing authority thereof or therein),
or any change in or amendment to the official application or interpretation of
such laws, regulation or rulings (a "CHANGE IN TAX LAW") which becomes effective
after the Relevant Date, as a result of which the Company is or would be so
required on the next succeeding Interest Payment Date to pay Additional Amounts
with respect to the Notes as described under Section 3 hereof with respect to
withholding taxes imposed by the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands (or any political
subdivision or taxing authority thereof or therein) (a "WITHHOLDING TAX") and
such Withholding Tax is imposed at a rate that exceeds the rate (if any) at
which Withholding Tax was imposed on the Relevant Date, provided, however, that
(i) this paragraph shall not apply to the extent that, at the Relevant Date it
was known or would have been known had professional advice of a nationally
recognized accounting firm in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been
sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the
Relevant Date, (ii) no such notice of redemption may be given earlier than 90
days prior to the earliest date on which the Company would be obliged to pay
such Additional Amounts were a payment in respect of the Notes then due, (iii)
at the time such notice of redemption is given, such obligation to pay such
Additional Amount remains in effect and (iv) the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to the
Company.
The Notes may also be redeemed, in whole but not in part, at any time
at a redemption price equal to the principal amount thereof plus accrued and
unpaid interest to the date fixed for redemption (or, in the case of redemption
of the Notes prior to November 15, 2004, at a redemption price equal to 100% of
the Accreted Value thereof as of the date fixed for redemption) if the Person
formed after the Relevant Date by a consolidation, amalgamation, reorganization
or reconstruction (or other similar arrangement) of the Company or the Person
into which the Company is merged after the Relevant Date or to which the Company
conveys, transfers or leases its properties and assets after the Relevant Date
substantially as an entirety (collectively, a "SUBSEQUENT CONSOLIDATION") is
required, as a consequence of such Subsequent Consolidation and as a consequence
of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands occurring after the date of such
Subsequent Consolidation to pay Additional Amounts with respect to Notes with
respect to Withholding Tax as described under Section 3 hereof and such
Withholding Tax is imposed at a rate that exceeds the rate (if any) at which
Withholding Tax was or would have been imposed on the date of such Subsequent
Consolidation, provided, however, that this paragraph shall not apply to the
extent that, at the date of such Subsequent Consolidation it was known or would
have been known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda
or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law
in the United
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Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands was to occur after such date.
The Company will also pay, or make available for payment, to Holders on
the Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 3 hereof) resulting from the payment of such
Redemption Price.
9. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
the Notes to be redeemed at his address of record. The Notes in denominations
larger than euro1,000 may be redeemed in part but only in integral multiples of
euro1,000. In the event of a redemption of less than all of the Notes, the
Notes will be chosen for redemption by the Trustee in accordance with the
Indenture. On and after the redemption date, interest ceases to accrue on the
Notes or portions of them called for redemption (and, if applicable, the
Accreted Value of the Notes called for redemption will cease to increase).
If this Note is redeemed subsequent to a record date with respect to
any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Note is registered at the close of business on such record date.
10. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
11. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date (or, in the case of repurchases of Notes prior to November 15,
2004, at a purchase price equal to 101% of the Accreted Value thereof as of the
Purchase Date), Holders of Notes that are subject to an offer to purchase will
receive a Change of Control offer from the Company prior to any related Purchase
Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, and when the aggregate amount of Excess Proceeds from
such Asset Sales exceeds $15.0 million, the Company shall be required
to make an offer (an "ASSET SALE OFFER") to all holders of the Notes
and Other Qualified Notes to purchase the maximum principal amount of
Notes and Other Qualified Notes (determined on a pro rata basis
according to the principal amount or accreted value, as the case may
be, of the Notes and the Other Qualified Notes) that may be purchased
out of the Excess Proceeds, with respect to the Notes, at an offer
price in cash in an amount equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the date
fixed for the closing of such offer (or, in the case of repurchases of
Notes prior to November 15, 2004, at a purchase price equal to 100% of
the Accreted Value thereof as of the date fixed for the closing of such
offer). To the extent that the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount or accreted value, as the case may be, of
Notes and Other Qualified Notes surrendered by holders thereof exceeds
the amount of Excess Proceeds, then such remaining Excess Proceeds will
be allocated pro rata according to principal amount or accreted value,
as the case may be, to the Notes and each issue of the Other Qualified
Notes and, the Trustee will select the Notes to be purchased in
accordance with Section 3.09(e) of the
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Indenture. Upon completion of such offer to purchase, the amount of
Excess Proceeds will be reset at zero.
12. Denominations, Transfer, Exchange. The Notes are in registered
form, without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption (except the unredeemed portion of any Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Note for a period of 15 days before a selection of Notes to be redeemed.
13. Persons Deemed Owners. Except as provided in paragraph 4 of this
Note, the registered Holder of a Note may be treated as its owner for all
purposes.
14. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
15. Defaults and Remedies. The Notes shall have the Events of Default
set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount at maturity of the then outstanding Notes by notice to the Company and
the Trustee may declare all the Notes to be due and payable immediately, except
that in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes
(or, if applicable, the Accreted Value thereof) shall become due and payable
immediately without further action or notice. The Holders of a majority in
principal amount at maturity of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
(or, if applicable, the Accreted Value) that has become due solely because of
the acceleration. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount at maturity of the then outstanding Notes issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference, and
subject in its entirety, to the more complete description thereof contained in
the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount at maturity of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes), and any existing default may be waived with the
consent of the Holders of a majority in principal amount at maturity of the then
outstanding Notes. Without the consent of any Holder, the Indenture or the Notes
may be amended among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Holders, to make any change that does not adversely affect the rights of any
Holder or to qualify the Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.
A-9
<PAGE> 74
17. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to, among other things, engage
in certain transactions with Affiliates, incur additional indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
18. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
19. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Notes.
20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
21. Authentication. The Notes shall not be valid until authenticated
by the manual signature of an authorized officer of the Trustee or an
authenticating agent.
22. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (- Custodian), and UGMA
(= Uniform Gifts to Minors Act).
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and
Secretary
A-10
<PAGE> 75
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
------------------------------------------
(Insert assignee's social security or tax I.D. no.)
------------------------------------------
------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: _______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: * ____________________________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Notes and the last date,
if any, on which such Notes were owned by the Company or any Affiliate
of the Company, the undersigned confirms that such Notes are being
transferred:
CHECK ONE BOX BELOW
(1) o to the Company or a subsidiary thereof,
(2) o to a qualified institutional buyer in compliance with Rule
144A,
(3) o outside the United States in compliance with Rule 903 or Rule
904 under the Securities Act,
(4) o pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available) or
(5) o inside the United States to an Institutional Accredited
Investor that, prior to such transfer, furnishes to the Trustee a
signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes (the form of
which letter can be obtained from the Trustee) and, if such transfer is
in respect of an aggregate principal amount at maturity of Notes of
less than euro100,000, an opinion of counsel acceptable to the Company
that such transfer is in compliance with the Securities Act,
(6) o pursuant to an effective registration statement under the
Securities Act.
_______________________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
A-ll
<PAGE> 76
--------------------------
Signature
Signature Guarantee*
- --------------------------
Signature must be guaranteed
- ------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Date: _____________________
- --------------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
NOTICE: To be executed by an executive officer
A-12
<PAGE> 77
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof
repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the
Indenture, check the box: [ ]
If the purchase is in part, indicate the portion (in
denominations of euro1,000 or any integral multiple thereof) to be purchased:
______________________
Your Signature: _______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:**/
_______________________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
A-13
<PAGE> 78
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be
euro___________. The following increases or decreases in the principal
amount at maturity of this Global Note have been made:
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Amount of decrease in Amount of increase Principal amount at Signature of Date of exchange
principal amount at in principal amount maturity of this authorized officer following such
maturity of this Global at maturity of this Global Note of Trustee or Common decrease or increase
Note Global Note Depositary
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
A-14
<PAGE> 79
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE]
[Global Notes Legend, if applicable]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC")
[,/OR] EUROCLEAR SYSTEM ("EUROCLEAR"), OR CEDELBANK S.A. ("CEDELBANK")2, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CHASE NOMINEES LIMITED. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR] EUROCLEAR
[OR CEDELBANK](AND ANY PAYMENT IS MADE TO CHASE NOMINEES LIMITED, OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC [OR]
EUROCLEAR [OR CEDELBANK]) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CHASE NOMINEES LIMITED, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC [OR] EUROCLEAR [OR CEDELBANK] OR TO
CUSTODIANS THEREOF OR THEIR NOMINEES OR TO A SUCCESSOR OF DTC [OR] EUROCLEAR [OR
CEDELBANK] OR SUCH SUCCESSOR'S NOMINEE OR TO CUSTODIANS OF SUCH SUCCESSOR OR
NOMINEE THEREOF AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Original Issue Discount Legend]
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING
THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE.
THE ISSUE DATE OF THIS NOTE IS NOVEMBER 24, 1999. THE ISSUE PRICE OF THIS NOTE
IS euro573.33 PER euro1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS
NOTE IS ISSUED WITH euro426.67 OF ORIGINAL ISSUE DISCOUNT PER euro1000.00 OF
INITIAL PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS
11 1/2%.
_______________________________
2 Reference to Cedelbank should only be included in the Regulation S Global
Note.
B-1
<PAGE> 80
No. ___________ euro__________
CINS No. [ ]/ISIN No. [ ]/ CUSIP No. [ ]
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTE DUE 2009
NTL Communications Corp., a Delaware corporation (the "COMPANY")
promises to pay to _________________________ or registered assigns, the
principal sum of euro[ ] [or such other amount as is indicated on Schedule A
hereof]**** on November 15, 2009, subject to the further provisions of this Note
set forth on the reverse hereof which further provisions shall for all purposes
have the same effect as if set forth at this place.
Interest Payment Dates: May 15 and November 15, commencing May 15, 2005
Record Dates: May 1 and November 1
IN WITNESS WHEREOF, NTL Communications Corp. has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: ________________
NTL COMMUNICATIONS CORP.
by:_________________________________
by:_________________________________
B-2
_______________________________
**** Applicable to Global Notes only.
<PAGE> 81
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/2% Series B
Senior Deferred Coupon Notes due 2009
described in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By: _____________________________________
Authorized Officer
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<PAGE> 82
(FORM OF REVERSE OF EXCHANGE NOTE)
NTL COMMUNICATIONS CORP.
11 1/2% Series B Senior Deferred Coupon Note due 2009
1. Interest. NTL Communications Corp., a Delaware corporation (the
"COMPANY"), is the issuer of 11 1/2% Series B Senior Deferred Coupon Notes due
2009 (the "NOTES"). The Notes are being issued at a discount from their
principal amount and will accrete (in accordance with the definition of Accreted
Value contained in the Indenture) at a rate of 11 1/2%, compounded semiannually,
to an aggregate principal amount of euro210,000,000 by November 15, 2004. The
Company promises to pay interest on the Notes in cash semiannually on each May
15 and November 15, commencing on May 15, 2005, to Holders of record on the
immediately preceding May 1 and November 1, respectively, at the rate of 11 1/2%
per annum. Interest on the Notes will accrue from the most recent date to which
interest has been paid on the Notes, or if no interest has been paid, from
November 15, 2004. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company will pay interest on overdue principal and
premium, if any, or overdue Accreted Value at the interest or accretion rate
borne by the Notes, compounded semiannually, and it shall pay interest on
overdue installments of interest (without regard to any applicable grace period)
at the same interest rate compounded semiannually. Any interest paid on this
Note shall be increased to the extent necessary to pay Additional Amounts as set
forth in this Note.
2. Additional Amounts. This Section 2 shall apply only in the event
that the Company becomes, or a successor to the Company is, a corporation
organized or existing under the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the
Company on this Note shall be made without deduction for or on account of, any
and all present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction of such taxes, duties, assessments or
governmental charges is then required by law. If any deduction or withholding
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom, the Netherlands, the Netherlands
Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing
authority thereof or taxing authority thereof or therein) shall at any time be
required in respect of any amounts to be paid by the Company under this Note,
the Company shall pay or cause to be paid such additional amounts ("ADDITIONAL
AMOUNTS") as may be necessary in order that the net amounts received by a Holder
of this Note after such deduction or withholding shall be not less than the
amounts specified in this Note to which the Holder of this Note is entitled;
provided, however, that the Company shall not be required to make any payment of
Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the
extent such tax, assessment or other governmental charge would not have
been imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, nominee, trust, partnership
or corporation), other than the holding of this Note or the receipt of
amounts payable in respect of this Note, the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or
any political subdivision or taxing authority thereof or therein,
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged
in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of this Note (where
presentation is required) for payment on a date more than 30 days after
the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs
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<PAGE> 83
later, except to the extent that the Holder would have been entitled to
Additional Amounts had this Note been presented on the last day of such
period of 30 days;
(b) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure to comply by the Holder of
this Note or, if different, the beneficial owner of the interest
payable on this Note, with a timely request of the Company addressed to
such Holder or beneficial owner to provide information, documents or
other evidence concerning the nationality, residence, identity or
connection with the taxing jurisdiction of such Holder or beneficial
owner which is required or imposed by a statute, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or governmental
charge;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which
is collectible otherwise than by withholding from payments of principal
amount, redemption amount, Change of Control Payment or interest with
respect to a Note or withholding from the proceeds of a sale or
exchange of a Note;
(e) any tax, assessment or other governmental charge
required to be withheld by any Paying Agent from any payment of
principal amount, redemption amount, Change of Control Payment or
interest with respect to a Note, if such payment can be made, and is in
fact made, without such withholding by any other Paying Agent located
inside the United States;
(f) any tax, assessment or other governmental charge imposed
on a Holder that is not the beneficial owner of a Note to the extent
that the beneficial owner would not have been entitled to the payment
of any such Additional Amounts had the beneficial owner directly held
the Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f)
above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Note to any Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent that a beneficiary or settlor would not have been entitled to any
Additional Amounts had such beneficiary or settlor been the Holder of this Note.
All references to principal amount or interest on the Notes in the Indenture or
the Notes shall include any Additional Amounts payable to the Company pursuant
to this Section 2.
3. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal and premium payments (or, if applicable, payments with respect to
Accreted Value). The Company will pay principal (or, if applicable, payments
with respect to Accreted Value), premium, if any, and interest in money of the
European Monetary Union that at the time of payment is legal tender for payment
of public and private debts. However, the Company may pay principal (or, if
applicable, payments with respect to Accreted Value), premium, if any, and
interest by check payable in such money. It may mail an interest check to a
holder's registered address. If a Holder so requests, principal (or, if
applicable, payments with respect to Accreted Value), premium, if any, and
interest may be paid by wire transfer of immediately available funds to an
account previously specified in writing by such Holder to the Company and the
Trustee.
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<PAGE> 84
4. Paying Agent and Registrar. The Chase Manhattan Bank (London) will
act as Paying Agent and Registrar in London. The Trustee will act as Paying
Agent and Registrar in the City of New York. Chase Manhattan Bank Luxembourg
S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the
Notes are listed on the Luxembourg Stock Exchange. The Company may change any
Paying Agent or Registrar without prior notice. The Company or any of its
Affiliates may act in any such capacity.
5. Indenture. The Company issued the Notes under an indenture, dated as
of November 24, 1999 (the "INDENTURE"), between the Company and The Chase
Manhattan Bank, as Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to, and qualified by, all such terms, certain
of which are summarized hereon, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes initially issued by the
Company on the date of the Indenture are unsecured general obligations of the
Company limited to euro210,000,000 in aggregate principal amount at maturity.
Additional Notes may be issued in accordance with the terms of the Indenture.
6. Optional Redemption. Except as provided in Section 7 herein, the
Notes are not redeemable at the Company's option prior to November 15, 2004.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount
at maturity) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004 ......................................... 105.750%
2005.......................................... 103.833%
2006.......................................... 101.917%
2007 and thereafter........................... 100.000%
</TABLE>
7. Optional Tax Redemption. (a) The Notes may be redeemed at the option
of the Company, in whole but not in part, upon not less than 30 nor more than 60
days notice, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption (or,
in the case of redemption of the Notes prior to November 15, 2004, at a
redemption price equal to 100% of the Accreted Value thereof as of the date of
redemption) if after the date on which Section 2 of this Note becomes applicable
(the "RELEVANT DATE") there has occurred any change in or amendment to the laws
(or any regulations or official rulings promulgated thereunder) of the United
Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman
Islands (or any political subdivision or taxing authority thereof or therein),
or any change in or amendment to the official application or interpretation of
such laws, regulations or rulings (a "CHANGE IN TAX LAW") which becomes
effective after the Relevant Date, as a result of which the Company is or would
be so required on the next succeeding Interest Payment Date to pay Additional
Amounts with respect to the Notes as described under Section 2 hereof with
respect to withholding taxes imposed by the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands (or any political
subdivision or taxing authority thereof or therein) (a "WITHHOLDING TAX") and
such Withholding Tax is imposed at a rate that exceeds the rate (if any) at
which Withholding Tax was imposed on the Relevant Date, provided, however, that
(i) this paragraph shall not apply to the extent that, at the Relevant Date it
was known or would have been known had professional advice of a nationally
recognized accounting firm in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be,
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<PAGE> 85
been sought, that a change in Tax Law in the United Kingdom, the Netherlands,
the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the
Relevant Date, (ii) no such notice of redemption may be given earlier than 90
days prior to the earliest date on which the Company would be obliged to pay
such Additional Amounts were a payment in respect of the Notes then due, (iii)
at the time such notice of redemption is given, such obligation to pay such
Additional Amount remains in effect and (iv) the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to the
Company.
(b) The Notes may also be redeemed, in whole but not in
part, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for
redemption (or, in the case of redemption of the Notes prior to
November 15, 2004, at a redemption price equal to 100% of the Accreted
Value thereof as of the date fixed for redemption) if the Person formed
after the Relevant Date by a consolidation, amalgamation,
reorganization or reconstruction (or other similar arrangement) of the
Company or the Person into which the Company is merged after the
Relevant Date or to which the Company conveys, transfers or leases its
properties and assets after the Relevant Date substantially as an
entirety (collectively, a "SUBSEQUENT CONSOLIDATION") is required, as a
consequence of such Subsequent Consolidation and as a consequence of a
Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands occurring after the
date of such Subsequent Consolidation to pay Additional Amounts with
respect to Notes with respect to Withholding Tax as described under
Section 2 hereof and such Withholding Tax is imposed at a rate that
exceeds the rate (if any) at which Withholding Tax was or would have
been imposed on the date of such Subsequent Consolidation, provided,
however, that this paragraph shall not apply to the extent that, at the
date of such Subsequent Consolidation it was known or would have been
known had professional advice of a nationally recognized accounting
firm in the United Kingdom, the Netherlands, the Netherlands Antilles,
Bermuda or the Cayman Islands, as the case may be, been sought, that a
Change in Tax Law in the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands was to occur after
such date.
The Company will also pay, or make available for payment, to Holders on
the Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 2 hereof) resulting from the payment of such
Redemption Price.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
the Notes to be redeemed at his address of record. The Notes in denominations
larger than euro1,000 may be redeemed in part but only in integral multiples of
euro1,000. In the event of a redemption of less than all of the Notes, the
Notes will be chosen for redemption by the Trustee in accordance with the
Indenture. On and after the redemption date, interest ceases to accrue on the
Notes or portions of them called for redemption. If this Note is redeemed
subsequent to a record date with respect to any interest payment date specified
above and on or prior to such interest payment date, then any accrued interest
will be paid to the Person in whose name this Note is registered at the close of
business on such record date (and, if applicable, the Accreted Value of the
Notes called for redemption will cease to increase).
9. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
10. Repurchase at Option of Holder. (a) If there is a Change of Control
Triggering Event, the Company shall be required to offer to purchase on the
Purchase Date all outstanding Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
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<PAGE> 86
Purchase Date (or, in the case of repurchases of Notes prior to November 15,
2004, at a purchase price equal to 100% of the Accreted Value thereof as of the
Purchase Date). Holders of Notes that are subject to an offer to purchase will
receive a Change of Control offer from the Company prior to any related Purchase
Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, and when the aggregate amount of Excess Proceeds from
such Asset Sales exceeds $15.0 million, the Company shall be required
to make an offer (an "ASSET SALE OFFER") to all holders of the Notes
and Other Qualified Notes to purchase the maximum principal amount of
Notes and other Qualified Notes (determined on a pro rata basis
according to the principal amount or accreted value, as the case may
be, of the Notes and the Other Qualified Notes) that may be purchased
out of the Excess Proceeds with respect to the Notes, at an offer price
in cash in an amount equal to 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer (or, in the case of repurchases of Notes
prior to November 15, 2004, at a purchase price equal to 101% of the
Accreted Value thereof as of the date fixed for the closing of such
offer). To the extent that the aggregate principal amount or accreted
value, as the case may be, of Notes and Other Qualified Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount or accreted value, as the case may be, of
Notes and Other Qualified Notes surrendered by holders thereof exceeds
the amount of Excess Proceeds then any remaining Excess Proceeds will
be allocated pro rata according to principal amount or accreted value,
as the case may be, to the Notes and each issue of the Other Qualified
Notes and, the Trustee will select the Notes to be purchased in
accordance with Section 3.09(e) of the Indenture. Upon completion of
such offer to purchase, the amount of Excess Proceeds will be reset at
zero.
11. Denominations, Transfer, Exchange. The Notes are in registered
form, without coupons, in denominations of euro1,000 and integral multiples of
euro1,000. The transfer of Notes may be registered, and Notes may be exchanged,
as provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption (except the unredeemed portion of any Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Note for a period of 15 days before a selection of Notes to be redeemed.
12. Persons Deemed Owners. Except as provided in paragraph 3 of this
Note, the registered Holder of a Note may be treated as its owner for all
purposes.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
14. Defaults and Remedies. The Notes shall have the Events of Default
as set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount at maturity of the then outstanding Notes by notice to the Company and
the Trustee may declare all the Notes to be due and payable immediately, except
that in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes
B-8
<PAGE> 87
(or, if applicable, the Accreted Value thereof) shall become due and payable
immediately without further action or notice. The Holders of a majority in
principal amount at maturity of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
(or, if applicable, the Accreted Value) that has become due solely because of
the acceleration. Holders may not enforce the Indenture or the Notes as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount at maturity of the then outstanding Notes issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference, and
subject in its entirety, to the more complete description thereof contained in
the Indenture.
15. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount at maturity of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes), and any existing default may be waived with the
consent of the Holders of a majority in principal amount at maturity of the then
outstanding Notes. Without the consent of any Holder, the Indenture or the Notes
may be amended among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Holders, to make any change that does not adversely affect the rights of any
Holder or to qualify the Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.
16. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to, among other things, engage
in certain transactions with Affiliates, incur additional Indebtedness and make
payments in respect of Capital Stock. The limitations are subject to a number of
important qualifications and exceptions.
17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
18. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
20. Authentication. The Notes shall not be valid until authenticated
by the manual signature of an authorized officer of the Trustee or an
authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and UGMA
(= Uniform Gifts to Minors Act).
B-9
<PAGE> 88
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
NTL Communications Corp.
110 East 59th Street, 26th Floor
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel
and Secretary
B-10
<PAGE> 89
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
__________________________________________
(Insert assignee's social security or tax I.D. no.)
__________________________________________
__________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: _______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: __________________
Signature Guarantee: **/ ______________________________
_______________________________
**/ Signature must be guaranteed by a commercial bank, trust company or member
of the New York Stock Exchange.
B-11
<PAGE> 90
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased
by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check
the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
euro 1,000 or any integral multiple thereof) to be purchased:
_____________________
Your Signature: _______________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________
Signature Guarantee:***
_____________________
*** Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
B-12
<PAGE> 91
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be
euro__________________. The following increases or decreases in the principal
amount at maturity of this Global Note have been made:
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Amount of decrease in Amount of increase Principal amount at Signature of Date of exchange
principal amount at in principal amount maturity of this authorized officer following such
maturity of this Global at maturity of this Global Note of Trustee or Common decrease or increase
Note Global Note Depositary
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
B-13
<PAGE> 92
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM RULE 144A GLOBAL NOTE
TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(ii)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Incorporated 11 1/2% Senior Deferred Coupon
Notes Due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee.
This letter relates to euro[ ] aggregate principal amount at maturity
of Notes which are held in the form of the [Rule 144A Global Note (CUSIP No. )]
with the Depositary in the name of [name of transferor] (the "Transferor") to
effect the transfer of the Notes in exchange for an equivalent beneficial
interest in the Regulation S Global Notes.
In connection with such request, the Transferor does hereby certify
that such transfer has been effected in accordance with the transfer
restrictions set forth in the Notes and (i) with respect to transfers made in
reliance on Regulation S, does hereby certify that:
(1) the offer of the Notes was not made to a Person in the
United States;
(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any Person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the United States Securities Act
of 1933, as amended (the "Securities Act");
and (ii) with respect to transfers made in reliance on Rule 144 does hereby
certify that the Senior Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act; and (iii) with respect to transfers made
in reliance on Rule 144A, does hereby certify that such Senior Notes are being
transferred in accordance with Rule 144A under the Securities Act to a
transferee that the Transferor reasonably believes is purchasing the Senior
Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion and the transferee and any such account is
a "qualified institutional buyer" within the meaning of Rule 144A, in a
transaction meeting the
C-1
<PAGE> 93
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the
case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Capitalized terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S.
[Name of Transferor]
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President
General Counsel and Secretary
C-2
<PAGE> 94
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE
TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(iii), (iv) or (v)
of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Market Fiduciary Services
Re: NTL Communications Corp. 11 1/2% Senior Deferred Coupon
Notes Due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount of Notes
which are held in the form of the [Regulation S Global Note] [(DTC Rule 144A
Global Note] [Euroclear Rule 144A Global Note] (CINS No. [ ]) (CUSIP No. [ ])
with the Depositary in the name of [name of transferor] (the "Transferor") to
effect the transfer of the Notes in exchange for an equivalent beneficial
interest in the [DTC][Euroclear] Rule 144A Global Note.
In connection with such request, and in respect of such Notes the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Senior Notes and
(ii) Rule 144A under the United States Securities Act of 1933, as amended, to a
transferee that the Transferor reasonably believes is purchasing the Notes for
its own account or an account with respect to which the transferee exercises
sole investment discretion and the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
[Name of Transferor],
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice-President,
General Counsel and Secretary
D-1
<PAGE> 95
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR RESTRICTED
NOTE TO RESTRICTED NOTE
(Transfers pursuant to Section 2.06(a)(vi)
or Section 2.06(a)(vii) of the Indenture)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 11 1/2% Senior Deferred Coupon
Notes due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture"), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount at maturity
of Notes which are held [in the form of the [Rule 144A/Regulation S] [Global]
[Restricted] Note (CINS No. [ ]/ISIN No. [ ]/CUSIP No. [ ]) with the Depositary
in the name of [name of transferor] (the "Transferor") to effect the transfer of
the Notes.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes and (ii) in
accordance with applicable securities laws of any state of the United States or
any other jurisdiction.
*Insert, if appropriate.
[Name of Transferor],
By:___________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
E-1
<PAGE> 96
EXHIBIT F
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
The Chase Manhattan Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Capital Markets Fiduciary Services
Re: NTL Communications Corp. 11 1/2% Senior Deferred Coupon
Notes due 2009 (the "Notes")
Reference is hereby made to the Indenture, dated as of November 24,
1999 (the "Indenture), between NTL Communications Corp., as Issuer, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein
shall have the respective meanings given them in the Indenture.
This letter relates to euro[ ] aggregate principal amount at maturity
of Notes which are held [in the form of the [Rule 144A/Regulation S]
[Restricted] [Global] Note (CINS No. [ ] / ISIN No. [ ]/CUSIP No.[ ]) with the
Depositary * * in the name of [name of transferor] (the "Transferor") to effect
the transfer of the Notes to the undersigned.
In connection with such request, and in respect of such Notes we
confirm that:
1. We understand that the Notes were originally offered in a
transaction not involving any public offering in the United States within the
meaning of the United States Securities Act of 1933, as amended (the "SECURITIES
ACT"), that the Notes have not been registered under the Securities Act and that
(A) the Notes may be offered, resold, pledged or otherwise transferred only (i)
to a Person who the seller reasonably believes is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, in a transaction meeting the requirements
of Rule 144 under the Securities Act, to a Person who the seller reasonably
believes is an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act), outside
the United States in a transaction meeting the requirements of Rule 903 or 904
of Regulation S under the Securities Act or in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (ii) to the Company, (iii)
pursuant to any other available exemption from registration or (iv) pursuant to
an effective registration statement, and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (B) the purchaser will, and each subsequent Holder
is required to, notify any subsequent purchaser from it of the resale
restrictions set forth in (A) above.
2. We are a corporation, partnership or other entity having such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Notes, and we are (or
any account for which we are purchasing under paragraph 4 below is) an
institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, able to bear the economic risk of our proposed
investment in the Notes.
_______________________________
* Insert and modify if appropriate
F-1
<PAGE> 97
3. We are acquiring the Notes for our own account (or for accounts as
to which we exercise sole investment discretion and have authority to make, and
do make, the statements contained in this letter) and not with a view to any
distribution of the Notes, subject, nevertheless, to the understanding that the
disposition of our property shall at all times be and remain within our control.
4. We are, and each account (if any) for which we are purchasing Notes
is, purchasing Notes having an aggregate principal amount at maturity of not
less than euro100,000 and, if such transfer is in respect of an aggregate
principal amount at maturity of Notes of less than euro100,000, we are
providing an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act.
5. We understand that (a) the Notes will be delivered to us in
registered form only and that the certificate delivered to us in respect of the
Notes will bear a legend substantially to the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
and (b) such certificates will be reissued without the foregoing legend
only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish to
dispose of any of the Notes, we will not do so unless:
(a) the Notes are sold to the Company or any subsidiary
thereof;
(b) the Notes are sold to a qualified institutional
buyer in compliance with Rule 144A under the Securities Act;
(c) the Notes are sold outside the United States in compliance
with Rule 903 or Rule 904 under the Securities Act;
(d) the Notes are sold to an Institutional Accredited Investor
in a transaction exempt from the registration requirements of the
Securities Act,
(d) the Notes are sold pursuant to an effective registration
statement under the Securities Act; or
(e) the Notes are sold pursuant to any other available
exemption from registration, subject to the requirements of the legend
set forth above.
Very truly yours,
F-2
<PAGE> 98
[PURCHASER]
By: ________________________________
Name:
Title:
Dated:
cc: NTL Communications Corp.
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
Executive Vice President, General Counsel and Secretary
F-3
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
================================================================================
euro250,000,000 9 1/4% SENIOR NOTES DUE 2006
euro350,000,000 9 7/8% SENIOR NOTES DUE 2009
euro210,000,000 11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
Dated as of November 24, 1999
by and among
NTL COMMUNICATIONS CORP.
and
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
SALOMON BROTHERS INTERNATIONAL LIMITED
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of November 24, 1999 by and among NTL Communications Corp., a Delaware
corporation (the "COMPANY"), and Morgan Stanley & Co. International Limited,
Goldman Sachs International, Chase Securities Inc., Donaldson, Lufkin & Jenrette
International and Salomon Brothers International Limited (each an "INITIAL
PURCHASER" and collectively, the "INITIAL PURCHASERS"). The Company proposes to
issue and sell to the Initial Purchasers (the "INITIAL PLACEMENT")
euro250,000,000 9 1/4% Senior Notes Due 2006 (the "2006 NOTES"), euro350,000,000
90% Senior Notes Due 2009 (the "2009 NOTES") and euro210,000,000 11 1/2% Senior
Deferred Coupon Notes Due 2009 (THE "DISCOUNT NOTES" and together with the 2006
Notes and the 2009 Notes, the "NOTES"). As an inducement to the Initial
Purchasers to enter into the purchase agreement, dated as of November 19, 1999
(the "PURCHASE AGREEMENT"), and in satisfaction of a condition to the Initial
Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Notes whose names appear in the
register maintained by the Registrar in accordance with the provisions of the
Indentures (as defined in Section 1 hereof) (including the Initial Purchasers),
as follows:
1. DEFINITIONS
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized defined terms shall have the following
meanings:
"2006 NOTES" has the meaning set forth in the preamble hereto.
"2006 NOTES INDENTURE" means the Indenture, dated as of November 24,
1999, between the Company and the 2006 Notes Trustee, relating to the 2006
Notes, as the same may be amended from time to time in accordance with the terms
thereof.
"2006 NOTES TRUSTEE" means the trustee with respect to the 2006 Notes
under the 2006 Notes Indenture.
"2009 NOTES" has the meaning set forth in the preamble hereto.
"2009 NOTES INDENTURE" means the Indenture, dated as of November 24,
1999, between the Company and the 2009 Notes Trustee, relating to the 2009
Notes, as the same may be amended from time to time in accordance with the terms
thereof.
"2009 NOTES TRUSTEE" means the trustee with respect to the 2009 Notes
under the 2009 Notes Indenture.
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"ACCRETED VALUE" means, as of any date of determination prior to
November 15, 2004 with respect to any Discount Note or Exchange Discount Note,
the sum of (a) the initial offering
<PAGE> 3
price (which shall be calculated by discounting the aggregate principal amount
at maturity of such Discount Note, at a rate of 11 1/2% per annum, compounded
semiannually on each May 15 and November 15 from November 15, 2004 to the date
of issuance) of such Discount Note, and (b) the portion of the excess of the
principal amount of such Discount Note or Exchange Discount Note over such
initial offering price which shall have been accreted thereon through such date,
such amount to be so accreted on a daily basis at a rate of 11 1/2% per annum of
the initial offering price of a Discount Note compounded semiannually on each
May 15 and November 5 from the date of issuance of the Discount Note or, with
respect to the Exchange Discount Notes, from the last day on which the increase
in the Accreted Value of the Discount Notes was compounded prior to the date of
original issuance of such Exchange Discount Notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months.
"AFFILIATE" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"CONSUMMATE" means the occurrence of (i) the filing and effectiveness
under the Act of the Exchange Offer Registration Statement relating to the
Exchange Notes to be issued in the Registered Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Registered Exchange Offer open for a period not less than the
minimum period required pursuant to Section 3(c)(ii) hereof, and (iii) the
delivery by the Company to the Registrar under the Indenture or the Exchange
Notes Indenture, as the case may be, of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes that were tendered
by Holders thereof and accepted for exchange pursuant to the Registered Exchange
Offer.
"DISCOUNT NOTES" has the meaning set forth in the preamble hereto.
"DISCOUNT NOTES INDENTURE" means the Indenture, dated as of November
24, 1999, between the Company and the Discount Notes Trustee, relating to the
Discount Notes, as the same may be amended from time to time in accordance with
the terms thereof.
"DISCOUNT NOTES TRUSTEE" means the trustee with respect to the Discount
Notes under the Discount Notes Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
2
<PAGE> 4
"EXCHANGE 2006 NOTES" means debt securities of the Company identical in
all material respects to the 2006 Notes (except that paragraph 2 of, and the
transfer restrictions on, the Notes will be eliminated) to be issued under the
2006 Notes Indenture or the Exchange 2006 Notes Indenture.
"EXCHANGE 2009 NOTES" means debt securities of the Company identical in
all material respects to the 2009 Notes (except that paragraph 2 of, and the
transfer restrictions on, the Notes will be eliminated) to be issued under the
2009 Notes Indenture or the Exchange 2009 Notes Indenture.
"EXCHANGE 2006 NOTES INDENTURE" means an indenture between the Company
and the Exchange 2006 Notes Trustee, identical in all material respects to the
2006 Notes Indenture (except that paragraph 2 of, and the transfer restrictions
on, the Notes will be eliminated).
"EXCHANGE 2009 NOTES INDENTURE" means an indenture between the Company
and the Exchange 2009 Notes Trustee, identical in all material respects to the
2009 Notes Indenture (except that paragraph 2 of, and the transfer restrictions
on, the Notes will be eliminated).
"EXCHANGE 2006 NOTES TRUSTEE" means a bank or trust company reasonably
satisfactory to the Initial Purchasers, as trustee with respect to the Exchange
2006 Notes under the Exchange 2006 Notes Indenture.
"EXCHANGE 2009 NOTES TRUSTEE" means a bank or trust company reasonably
satisfactory to the Initial Purchasers, as trustee with respect to the Exchange
2009 Notes under the Exchange 2009 Notes Indenture.
"EXCHANGE DISCOUNT NOTES" means debt securities of the Company
identical in all material respects to the Discount Notes (except that the
Accreted Value of the Exchange Discount Notes will increase from the last day on
which the increase in the Accreted Value of the Discount Notes was compounded
prior to the date of original issuance of the Exchange Discount Notes, and
paragraph 2 of, and the transfer restrictions on, the Discount Notes will be
eliminated), to be issued under the Discount Notes Indenture or the Exchange
Notes Indenture.
"EXCHANGE DISCOUNT NOTES INDENTURE" means an indenture between the
Company and the Exchange Discount Notes Trustee, identical in all material
respects to the Discount Notes Indenture (except that the Accreted Value of the
Exchange Notes will increase from the last day on which the increase in the
Accreted Value of the Notes was compounded prior to the date of original
issuance of the Exchange Notes, and paragraph 2 of, and the transfer
restrictions on, the Notes will be eliminated).
"EXCHANGE DISCOUNT NOTES TRUSTEE" means a bank or trust company
reasonably satisfactory to the Initial Purchasers, as trustee with respect to
the Exchange Discount Notes under the Exchange Discount Notes Indenture.
"EXCHANGE NOTES" means the Exchange 2006 Notes, the Exchange 2009 Notes
and the Exchange Discount Notes.
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<PAGE> 5
"EXCHANGE NOTES INDENTURES" means the Exchange 2006 Notes Indenture,
Exchange 2009 Notes Indenture and Exchange Discount Notes Indenture.
"EXCHANGE NOTES TRUSTEES" means the Exchange 2006 Notes Trustee, the
Exchange 2009 Notes Trustee and the Exchange Discount Notes Trustee.
"EXCHANGE OFFER REGISTRATION PERIOD" means a period expiring upon the
earliest to occur of (i) the one year period following the Consummation of the
Registered Exchange Offer, (ii) the date on which, in the opinion of counsel to
the Company, all of the Transfer Restricted Securities then held by the Holders
may be sold by such Holders in the public United States securities markets in
the absence of a registration statement covering such sales and (iii) the date
on which there ceases to be outstanding any Transfer Restricted Securities.
"EXCHANGE OFFER REGISTRATION STATEMENT" means a registration statement
of the Company on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, and in each case, including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"EXCHANGING DEALER" means any Holder (which may include the Initial
Purchasers) that is a broker-dealer, electing to exchange Transfer Restricted
Securities, acquired for its own account as a result of market-making activities
or other trading activities, for Exchange Notes.
"HOLDER" has the meaning set forth in Section 2 hereof.
"INDENTURES" means the 2006 Notes Indenture, 2009 Notes Indenture and
the Discount Notes Indenture.
"INITIAL PLACEMENT" has the meaning set forth in the preamble hereto.
"LOSSES" has the meaning set forth in Section 8(d) hereof.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount at maturity of securities registered under a Registration
Statement.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"NOTES" has the meaning set forth in the preamble hereto.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of Transfer Restricted Securities or the Exchange Notes,
covered by such Registration Statement, and all amendments and supplements to
the Prospectus, including post-effective amendments.
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<PAGE> 6
"REGISTERED EXCHANGE OFFER" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for Notes, a like principal
amount at maturity of the Exchange Notes.
"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or any Shelf Registration Statement, which is filed pursuant to the
provisions hereof, and in each case, including the Prospectus contained therein,
all amendments and supplements thereto, including post-effective amendments, and
all exhibits and material incorporated by reference therein.
"SHELF REGISTRATION" means a registration effected pursuant to Section
4 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section 4(b)
hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 4 hereof that covers some
or all of the Transfer Restricted Securities as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, and in each case, including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"SUPPLEMENT DELAY PERIOD" means any period commencing on the date of
receipt by a Holder of Transfer Restricted Securities or Exchange Notes of any
notice from the Company of the existence of any fact or event of the kind
described in Section 5(b)(2) hereof and ending on the date of receipt by such
Holder of an amended or supplemented Registration Statement or Prospectus, as
contemplated by Section 5(j) hereof, or the receipt by such Holder of written
notice from the Company (the "ADVICE") that the use of the Prospectus may be
resumed, and the receipt of copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus.
"TRANSFER RESTRICTED SECURITIES" means each Note until (i) the date on
which such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Registered Exchange Offer, (ii) following the exchange by
an Exchanging Dealer in the Registered Exchange Offer of a Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement (iv) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act
(or any similar provision then in effect) or is saleable pursuant to Rule 144(k)
under the Act or (v) the date upon which such Note ceases to be outstanding.
"TRUSTEES" means the 2006 Notes Trustee, the 2009 Notes Trustee and the
Discount Notes Trustee.
"UNDERWRITER" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
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<PAGE> 7
2. HOLDERS
A person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such person becomes the registered holder of such
Notes under the Indentures and includes broker-dealers that hold Transfer
Restricted Securities (i) as a result of market making activities and other
trading activities and (ii) which were acquired directly from the Company or an
Affiliate.
3. REGISTERED EXCHANGE OFFER
(a) The Company shall prepare and, on or prior to 180 days
following the Closing Date, shall file with the Commission the
Exchange Offer Registration Statement with respect to the
Registered Exchange Offer. The Company shall use its best
efforts to cause the Exchange Offer Registration Statement to
become effective under the Act on or prior to 270 days after
the Closing Date. The Company shall use its best efforts to
Consummate the Registered Exchange Offer on or prior to 310
days after the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered
Exchange Offer to enable each Holder electing to exchange
Transfer Restricted Securities for Exchange Notes (assuming
that such Holder is not an Affiliate of the Company within the
meaning of the Act, acquires the Exchange Notes in the
ordinary course of such Holder's business and has no
arrangements with any person to participate in the
distribution of the Exchange Notes) to trade such Exchange
Notes from and after their receipt without any limitations or
restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the
Company shall:
(i) mail to each Holder a copy of the
Prospectus forming part of the Exchange
Offer Registration Statement, together with
an appropriate letter of transmittal and
related documents;
(ii) keep the Registered Exchange Offer open
for not less than 30 days and not more than
45 days after the date notice thereof is
mailed to the Holders (or longer if required
by applicable law);
(iii) utilize the services of one or more
depositaries or exchange agents (which, in
either case, may be any Trustee) for the
Registered Exchange Offer with an address
(A) in the Borough of Manhattan, The City of
New York and (B) if the Notes are then
listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange
so require, Luxembourg; and
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<PAGE> 8
(iv) comply in all material respects with
all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Transfer
Restricted Securities tendered and not
validly withdrawn pursuant to the Registered
Exchange Offer;
(ii) deliver to the appropriate Trustee for
cancellation all Transfer Restricted
Securities so accepted for exchange; and
(iii) cause the appropriate Trustee or the
appropriate Exchange Notes Trustee, as the
case may be, promptly to authenticate and
deliver to each Holder of Transfer
Restricted Securities, Exchange Notes of a
like principal amount at maturity to the
Transfer Restricted Securities of such
Holder so accepted for exchange.
(e) The Initial Purchasers and the Company acknowledge that,
pursuant to interpretations by the Commission's staff of
Section 5 of the Act, and in the absence of an applicable
exemption therefrom, each Exchanging Dealer is required to
deliver a Prospectus in connection with a sale of any Exchange
Notes received by such Exchanging Dealer pursuant to the
Registered Exchange Offer in exchange for Transfer Restricted
Securities acquired for its own account as a result of
market-making activities or other trading activities.
Accordingly, the Company shall, subject to comment by the
Commission staff:
(i) include the information set forth in (A)
Annex A hereto on the cover of the Exchange
Offer Registration Statement, (B) Annex B
hereto in the forepart of the Exchange Offer
Registration Statement in a section setting
forth details of the Registered Exchange
Offer, (C) Annex C hereto in the "Plan of
Distribution" section of the Prospectus
contained in the Exchange Offer Registration
Statement and (D) Annex D hereto in the
Letter of Transmittal delivered pursuant to
the Registered Exchange Offer and
(ii) use its best efforts to keep the
Exchange Offer Registration Statement
continuously effective (subject to the
existence of a Supplement Delay Period)
under the Act during the Exchange Offer
Registration Period for delivery by
Exchanging Dealers in connection with sales
of Exchange Notes received pursuant to the
Registered Exchange Offer, as contemplated
by Section 5(g) below.
(f) In the event that any Initial Purchaser determines that it
is not eligible to participate in the Registered Exchange
Offer with respect to the exchange of
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<PAGE> 9
Transfer Restricted Securities constituting any portion of an
unsold allotment of Notes, at the written request of such
Initial Purchaser, the Company shall issue and deliver to such
Initial Purchaser or the party purchasing Transfer Restricted
Securities registered under a Shelf Registration Statement as
contemplated by Section 4 hereof from such Initial Purchaser,
in exchange for such Transfer Restricted Securities, a like
principal amount at maturity of Exchange Notes. Exchange Notes
issued in exchange for Transfer Restricted Securities
constituting any portion of an unsold allotment of Notes that
are not registered under a Shelf Registration Statement as
contemplated by Section 4 hereof shall bear a legend as to
restrictions on transfer. The Company shall seek to cause the
CUSIP Service Bureau to issue the same CUSIP/ISIN/Common Code
number for such Exchange Notes as for Exchange Notes issued
pursuant to the Registered Exchange Offer.
4. SHELF REGISTRATION
If, (i) the Company is not required to file the Exchange Offer
Registration Statement nor permitted to Consummate the Registered Exchange Offer
because the Registered Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company in writing within 10 business days of the filing and effectiveness
under the Act of the Exchange Offer Registration Statement that (A) it is
prohibited by law or Commission policy from participating in the Registered
Exchange Offer, (B) it may not resell the Exchange Notes acquired by it in the
Registered Exchange Offer to the public without delivering a prospectus, and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) it is a broker-dealer and owns
Notes acquired directly from the Company or an Affiliate (it being understood
that, for purposes of this Section 4, (x) the requirement that an Initial
Purchaser deliver a Prospectus containing the information required by Items 507
and/or 508 of Regulation S-K under the Act in connection with sales of Exchange
Notes acquired in exchange for such Notes shall result in such Exchange Notes
being not "freely tradeable" but (y) the requirement that an Exchanging Dealer
deliver a Prospectus in connection with sales of Exchange Notes acquired in the
Registered Exchange Offer in exchange for Notes acquired as a result of
market-making activities or other trading activities shall not result in such
Exchange Notes being not "freely tradeable"), the following provisions shall
apply:
(a) The Company shall as promptly as practicable, file with
the Commission and thereafter shall use its best efforts to
cause to be declared effective under the Act on or prior to
310 days after the date of original issuance of the Notes, a
Shelf Registration Statement relating to the offer and sale of
the Transfer Restricted Securities by the Holders from time to
time in accordance with the methods of distribution elected by
such Holders and set forth in such Shelf Registration
Statement; provided, however, that with respect to Exchange
Notes received by an Initial Purchaser in exchange for
Transfer Restricted Securities constituting any portion of an
unsold allotment of Notes, the Company may, if permitted by
current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation
S-K Items 507 and/or 508, as applicable, in satisfaction of
its
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<PAGE> 10
obligations under this paragraph (a) with respect thereto, and
any such Exchange Offer Registration Statement, as so amended,
shall be referred to herein as, and governed by the provisions
herein applicable to, a Shelf Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by
Holders for a period of two years from the date the Shelf
Registration statement is declared effective by the Commission
(or until one year after such effective date if such Shelf
Registration Statement is filed at the request of an Initial
Purchaser) or such shorter period that will terminate when (i)
all the Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf
Registration Statement, (ii) the date on which, in the opinion
of counsel to the Company, all of the Transfer Restricted
Securities then held by the Holders may be sold by such
Holders in the public United States securities markets in the
absence of a registration statement covering such sales or
(iii) the date on which there ceases to be outstanding any
Transfer Restricted Securities (in any such case, such period
being called the "SHELF REGISTRATION PERIOD"). The Company
shall be deemed not to have used its best efforts to keep the
Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in
Holders of Transfer Restricted Securities covered thereby not
being able to offer and sell such securities during that
period, unless (i) such action is required by applicable law,
(ii) such action is taken by the Company in good faith and for
valid business reasons (not including avoidance of the
Company's obligations hereunder), including the acquisition or
divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 5(j)
hereof, if applicable or (iii) such action is taken because of
any fact or circumstance giving rise to a Supplement Delay
Period.
5. REGISTRATION PROCEDURES
In connection with any Shelf Registration Statement and, to the extent
applicable, any Exchange Offer Registration Statement, the following provisions
shall apply:
(a) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming
part thereof and any amendment or supplement thereto complies
in all material respects with the Act and the rules and
regulations thereunder, (ii) any Registration Statement and
any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Registration
Statement, and any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they
were made, not misleading.
(b) (1) The Company shall advise the Initial Purchasers and,
in the case of a Shelf Registration Statement, the Holders of
Transfer Restricted Securities
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<PAGE> 11
covered thereby, and, if requested by the Initial Purchasers
or any such Holder, confirm such advice in writing when a
Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement
or any post-effective amendment thereto has become effective.
(2) The Company shall advise the Initial Purchasers
and, in the case of a Shelf Registration Statement, the
Holders of Transfer Restricted Securities covered thereby,
and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer which has provided in writing to the
Company a telephone or facsimile number and address for
notices, and, if requested by the Initial Purchasers or any
such Holder or Exchanging Dealer, confirm such advice in
writing:
(i) of any request by the Commission for
amendments or supplements to the
Registration Statement or the Prospectus
included therein or for additional
information;
(ii) of the initiation by the Commission of
proceedings relating to a stop order
suspending the effectiveness of the
Registration Statement;
(iii) of the issuance by the Commission of
any stop order suspending the effectiveness
of the Registration Statement;
(iv) of the receipt by the Company of any
notification with respect to the suspension
of the qualification of the securities
included therein for sale in any
jurisdiction or the initiation or
threatening of any proceeding for such
purpose; and
(v) of the existence of any fact and the
happening of any event (including, without
limitation, pending negotiations relating
to, or the consummation of, a transaction or
the occurrence of any event which would
require additional disclosure of material
non-public information by the Company in the
Shelf Registration Statement as to which the
Company has a bona fide business purpose for
preserving confidential or which renders the
Company unable to comply with Commission
requirements) that, in the opinion of the
Company, makes untrue any statement of a
material fact made in its Shelf Registration
Statement, the Prospectus or any amendment
or supplement thereto or any document
incorporated by reference therein or
requires the making of any changes in the
Registration Statement or the Prospectus so
that, as of such date, the statements
therein are not misleading and do not omit
to state a material fact required to be
stated therein or necessary to make the
statements therein (in the case of the
Prospectus, in light of the circumstances
under which they were made) not misleading.
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<PAGE> 12
Such advice may be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made.
(c) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(d) The Company shall use its best efforts to furnish to each
selling Holder included within the coverage of any Shelf
Registration Statement who so requests in writing and who has
provided to the Company an address for notices, without
charge, at least one conformed copy of such Shelf Registration
Statement and any post-effective amendment thereto, including
financial statements and, if the Holder so requests in
writing, all exhibits and schedules (including those
incorporated by reference).
(e) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Transfer Restricted Securities
covered by any Shelf Registration Statement and who has
provided to the Company an address for notices, without
charge, as many copies of the Prospectus (including each
preliminary Prospectus) contained in such Shelf Registration
Statement and any amendment or supplement thereto as such
Holder may reasonably request; subject to any notice by the
Company in accordance with Section 6(b) hereof, the Company
consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders for the
purposes of offering and resale of the Transfer Restricted
Securities covered by the Prospectus in accordance with the
applicable regulations promulgated under the Act.
(f) The Company shall furnish to each Exchanging Dealer, which
so requests in writing, without charge, at least one copy of
the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial
statements, and, if the Exchanging Dealer so requests in
writing, any documents incorporated by reference therein and
all exhibits and schedules (including those incorporated by
reference).
(g) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without
charge, as many copies of the Prospectus included in such
Exchange Offer Registration Statement and any amendment or
supplement thereto as such Exchanging Dealer may reasonably
request for delivery by such Exchanging Dealer in connection
with a sale of Exchange Notes received by it pursuant to the
Registered Exchange Offer; the Company consents to the use of
the Prospectus or any amendment or supplement thereto by any
such Exchanging Dealer for the purposes contemplated by the
Act or the applicable regulations promulgated under the Act.
(h) Prior to the Registered Exchange Offer or any offering of
Transfer Restricted Securities pursuant to any Registration
Statement, the Company shall register or qualify or cooperate
with the Holders of Transfer Restricted Securities
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<PAGE> 13
named therein and their respective counsel in connection with
the registration or qualification of such Transfer Restricted
Securities for offer and sale under the securities or blue sky
laws of such jurisdictions of the United States as any such
Holders reasonably request in writing not later than the date
that is five business days prior to the date upon which this
Agreement specifies that the Registration Statement shall
become effective; provided, however, that the Company will not
be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or
to taxation in any such jurisdiction where it is not then so
subject.
(i) The Company shall endeavor to cooperate with the Holders
of Transfer Restricted Securities to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may
request in writing at least two business days prior to sales
of securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraph
(b)(2)(v) hereof, the Company shall promptly prepare a
post-effective amendment to any Registration Statement or an
amendment or supplement to the related Prospectus or file any
other required document so that as thereafter delivered to
purchasers of the Transfer Restricted Securities covered
thereby, the Prospectus will not include an untrue statement
of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided that in the event of a material business transaction
(including, without limitation, pending negotiations relating
to such a transaction) which would, in the opinion of counsel
to the Company, require disclosure by the Company in the Shelf
Registration Statement of material non-public information for
which the Company has a bona fide business purpose for not
disclosing, then for so long as such circumstances exist, the
Company shall not be required to prepare and file a supplement
or post-effective amendment hereunder.
(k) Not later than the effective date of any such Registration
Statement hereunder, the Company shall cause to be provided a
CUSIP/ISIN number for the Notes or Exchange Notes, as the case
may be, registered under such Registration Statement, and
provide the applicable trustee with printed certificates for
such Notes or Exchange Notes, in a form eligible for deposit
with Euroclear.
(l) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall
make generally available to its security holders in a regular
filing on Form 10-Q or 10-K an earnings statement satisfying
the provisions of Rule 158 (which need not be audited) for the
twelve-month period commencing after effectiveness of the
Shelf Registration Statement.
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<PAGE> 14
(m) The Company shall cause the Indentures or the Exchange
Notes Indentures, as the case may be, to be qualified under
the Trust Indenture Act in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities, which are to be sold pursuant to any Shelf
Registration Statement, to furnish to the Company within 20
business days after written request for such information has
been made by the Company, such information regarding the
Holder and the distribution of such securities as the Company
may from time to time reasonably require for inclusion in such
Registration Statement and such other information as may be
necessary or advisable in the reasonable opinion of the
Company and its counsel, in connection with such Shelf
Registration Statement. No Holder of Transfer Restricted
Securities shall be entitled to use the Prospectus unless and
until such Holder shall have furnished the information
required by this Section 5(n) and all such information
required to be disclosed in order to make the information
previously furnished to the Company by such Holder not
materially misleading.
(o) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing
Underwriters and Majority Holders reasonably agree should be
included therein and shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action
pursuant to this Section 5(o) that would, in the opinion of
counsel for the Company, violate applicable law or to include
information the disclosure of which at the time would have an
adverse effect on the business or operations of the Company
and/or its subsidiaries, as determined in good faith by the
Company.
(p) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including
underwriting agreements) and take all other reasonably
appropriate actions in order to expedite or facilitate the
registration or the disposition of the Transfer Restricted
Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable
than those set forth in Section 8 (or such other provisions
and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any), with respect to all parties to
be indemnified pursuant to Section 8 from Holders of Notes to
the Company.
(q) In the case of any Shelf Registration Statement, the
Company shall:
(i) make reasonably available for inspection
by representatives of the Holders of
Transfer Restricted Securities to be
registered thereunder, the Managing
Underwriter participating in any disposition
pursuant to such Registration Statement, and
any attorney, accountant or other agent
retained by the Holders or any
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<PAGE> 15
such Managing Underwriter, at the office
where normally kept during normal business
hours, all financial and other records,
pertinent corporate documents and properties
of the Company and its subsidiaries, and
cause the Company's officers, directors and
employees to supply all relevant information
reasonably requested by the Holders or any
Managing Underwriter, attorney, accountant
or other agent in connection with any such
Registration Statement as is customary for
similar due diligence examinations;
provided, however, that the foregoing
inspection and information gathering shall
be coordinated by the Managing Underwriters,
if any, or by one counsel designated by the
Holders and that such persons shall first
agree in writing with the Company that any
information that is designated in writing by
the Company, in good faith, as confidential
at the time of delivery of such information
shall be kept confidential by such person,
unless such disclosure is made in connection
with a court proceeding or required by law,
or such information becomes available to the
public generally or through a third party
without an accompanying obligation of
confidentiality;
(ii) make such representations and
warranties to the Holders of Transfer
Restricted Securities registered thereunder
and the underwriters, if any, in form,
substance and scope as are customarily made
by issuers to underwriters in underwritten
offerings and covering matters including,
but not limited to, those set forth in the
Purchase Agreement;
(iii) obtain opinions of counsel to the
Company and updates thereof (which counsel
and opinions (in form, scope and substance)
shall be reasonably satisfactory to the
Managing Underwriters, if any), addressed to
each selling Holder and the underwriters, if
any, covering such matters as are
customarily covered in opinions requested in
underwritten offerings and such other
matters as may be reasonably requested by
such Holders and underwriters;
(iv) obtain "cold comfort" letters (or, in
the case of any person that does not satisfy
the conditions for receipt of a "cold
comfort" letter specified in Statement on
Auditing Standards No. 72, an "agreed-upon
procedures letter") and updates thereof from
the independent certified public accountants
of the Company (and, if necessary, any other
independent certified public accountants of
any subsidiary of the Company or of any
business acquired by the Company for which
financial statements and financial data are,
or are required to be, included in the
Registration Statement), addressed where
reasonably practicable to each selling
Holder of Transfer Restricted Securities
registered thereunder and the
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<PAGE> 16
underwriters, if any, in customary form and
covering matters of the type customarily
covered in "cold comfort" letters in
connection with primary underwritten
offerings; and
(v) deliver such documents and certificates
as may be reasonably requested by the
Majority Holders and the Managing
Underwriters, if any, including those to
evidence compliance with Section 5(j) and
with any customary conditions contained in
the underwriting agreement or other
agreement entered into by the Company.
The foregoing actions set forth in clauses
(ii), (iii), (iv) and (v) of this Section 5(q) shall, if reasonably
requested by the Majority Holder or the Majority Underwriters, be
performed at (A) the effectiveness of such Registration Statement and
each post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement, as to the extent required
thereunder.
(vi) The Company may offer securities of the
Company other than the Notes or the Exchange
Notes under the Shelf Registration
Statement, except where such offer would
conflict with the terms of the Purchase
Agreement.
6. HOLDERS' AGREEMENTS
Each Holder of Transfer Restricted Securities and Exchange Notes, by
the acquisition of such Transfer Restricted Securities or Exchange Notes, as the
case may be, agrees:
(a) To furnish the information required to be furnished
pursuant to Section 5(n) hereof within the time period set
forth therein.
(b) That upon receipt of a notice of the commencement of a
Supplement Delay Period, it will keep the fact of such notice
confidential, forthwith discontinue disposition of its
Transfer Restricted Securities or Exchange Notes, as the case
may be, pursuant to the Registration Statement, and will not
deliver any Prospectus forming a part thereof until receipt of
the amended or supplemented Registration Statement or
Prospectus, as applicable, as contemplated by Section 5(j)
hereof, or until receipt of the Advice. If a Supplement Delay
Period should occur, the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, shall be
extended by the number of days of which the Supplement Delay
Period is comprised; provided that the Shelf Registration
Period shall not be extended if the Company has received an
opinion of counsel (which counsel, if different from counsel
to the Company referred to in Section 6(a) and (b) of the
Purchase Agreement, shall be reasonably satisfactory to the
Majority Holders of the Transfer Restricted Securities named
in the Shelf Registration Period) to the effect that the
Transfer Restricted Securities can be freely tradeable without
the continued effectiveness of the Shelf Registration
Statement.
15
<PAGE> 17
(c) If so directed by the Company in a notice of the
commencement of a Supplement Delay Period, each Holder of
Transfer Restricted Securities or Exchange Notes, as the case
may be, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering the Transfer
Restricted Securities or Exchange Notes, as the case may be.
(d) Sales of such Transfer Restricted Securities pursuant to a
Registration Statement shall only be made in the manner set
forth in such currently effective Registration Statement.
7. REGISTRATION EXPENSES
The Company shall bear all expenses incurred in connection with the
performance of its obligations under Sections 3, 4 and 5 hereof and, in the
event of any Shelf Registration Statement, will reimburse the Holders for the
reasonable fees and disbursements of one firm or counsel designated by the
Majority Holders to act as counsel for the Holders in connection therewith, and,
in the case of any Exchange Offer Registration Statement, will reimburse the
Initial Purchasers for the reasonable fees and disbursements of counsel acting
in connection therewith. Notwithstanding the foregoing or anything in this
Agreement to the contrary, each Holder shall pay all underwriting discounts and
commission of any underwriters with respect to any Transfer Restricted
Securities sold by it.
8. INDEMNIFICATION AND CONTRIBUTION
(a) In connection with Registration Statement, the Company
agrees to indemnify and hold harmless each Holder of Transfer
Restricted Securities covered thereby (including each Initial
Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 5(g) hereof, each Exchanging Dealer),
the directors, officers, employees, partners, representatives
and agents of each such Holder and each person who controls
any such Holder within the meaning of either Section 15 of the
Act or Section 20 of the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, or are based upon, any untrue statement
or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or
Prospectus, or in any amendment thereof or supplement thereto,
or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however,
that (i) the Company will not be liable in any case to the
extent that any such loss, claim, damage or liability arises
out of, or is based upon, any such untrue statement or alleged
untrue
16
<PAGE> 18
statement or omission or alleged omission made therein in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder or
by the Managing Underwriters specifically for inclusion
therein and (ii) the Company will not be liable to any
indemnified party under this indemnity agreement with respect
to the Registration Statement or Prospectus to the extent that
any such loss, claim, damage or liability of such indemnified
party results solely from an untrue statement of a material
fact contained in, or the omission of a material fact from,
the Registration Statement or Prospectus, which untrue
statement or omission was corrected in an amended or
supplemented Registration Statement or Prospectus, if the
person alleging such loss, claim, damage or liability was not
sent or given, at or prior to the written confirmation of such
sale, a copy of the amended or supplemented Registration
Statement or Prospectus if the Company had previously
furnished copies thereof to such indemnified party and if
delivery of a prospectus is required by the Act and was not so
made. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses
of, as provided in Section 8(d), any underwriters of Notes registered under a
Shelf Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Initial Purchasers and the selling Holders provided in
this Section 8(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 5(p)
hereof.
(b) Each Holder of Transfer Restricted Securities or Exchange
Notes covered by a Registration Statement (including each
Initial Purchaser and, with respect to any Prospectus delivery
as contemplated in Section 5(g) hereof, each Exchanging
Dealer) severally agrees to indemnify and hold harmless (i)
the Company, (ii) each of its directors, (iii) each of its
officers who signs such Registration Statement and (iv) each
person who controls the Company within the meaning of either
the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company to each such Holder, but
only with reference to written information relating to such
Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in
addition to any liability which any such Holder may otherwise
have. In no event shall any Holder, its directors, officers or
any person who controls such Holder be liable or responsible
for any amount in excess of the amount by which the total
amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any
person who controls such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
17
<PAGE> 19
(c) Promptly after receipt by an indemnified party under this
Section 8 or notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement
thereof; but the failure to so notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent
the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel
(and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying
party, and the indemnified party reasonably concluded that
there may be legal defenses available to it and/or other
indemnified parties that are different from or additional to
those available to the indemnifying party, (iii) the
indemnifying party did not employ counsel satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action
or (iv) the indemnifying party authorized the indemnified
party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party shall not, without
the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding for which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action), unless
such settlement, compromise or consent includes an
unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or
proceeding and does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on
behalf of the indemnified party.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party for any reason, then each
applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation
to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other
18
<PAGE> 20
expenses reasonably incurred in connection with investigating
or defending same) (collectively "LOSSES") to which such
indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided,
however, that in no case shall any Initial Purchaser or any
subsequent Holder of any Note or Exchange Note be responsible,
in the aggregate, for any amount in excess of the purchase
discount on the initial offering price of such Notes or
commission applicable to such Note, or in the case of an
Exchange Note, applicable to the Note which was exchangeable
into such Exchange Note (which shall be 2N% per 2006 Note, 2N%
per 2009 Note and 2O% per Discount Note), nor shall any
underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the
securities purchased by such underwriter under the
Registration Statement that resulted in such Losses. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits, but
also the relative fault of such indemnifying party, on the one
hand, and such indemnified party, on the other hand, in
connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable
considerations. Benefits received by the Company shall be
deemed to be equal to the sum of (x) the total net proceeds
from the Initial Placement (before deducting expenses) (which
shall be euro701,187,820.13 and (y) the total amount of
additional interest that the Company was not required to pay
as a result of registering the securities covered by the
Registration Statement that resulted in such Losses. Benefits
received by the Initial Purchasers shall be deemed to be equal
to the total purchase discounts and commissions in connection
with the Initial Placement, and benefits received by any other
Holders shall be deemed to be equal to the value of receiving
Notes or Exchange Notes, as applicable, registered under the
Act. Benefits received by any underwriter shall be deemed to
be equal to the total underwriting discounts and commissions,
as set forth on the cover page of the Prospectus forming a
part of the Registration Statement that resulted in such
Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one
hand, or by the indemnified party, on the other hand. The
parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any
other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding
the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any
person who was guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person who controls a
Holder within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of such
Holder shall have the same rights to contribution as such
Holder, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of
the
19
<PAGE> 21
Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 8 shall remain in full
force and effect, regardless of any investigation made by or
on behalf of any Holder or the Company or any of the officers,
directors or controlling persons referred to in Section 8
hereof, and will survive the sale by a Holder of Transfer
Restricted Securities or Exchange Notes.
9. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
10. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its
securities that is inconsistent with the rights granted to the
Holders herein or otherwise conflicts with the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the
Holders of at least a majority of the then outstanding
aggregate principal amount of Notes (or, after the
consummation of any Registered Exchange Offer in accordance
with Section 3 hereof, of Exchange Notes); provided, however,
that with respect to any matter that directly or indirectly
affects the rights of any Initial Purchaser hereunder, the
Company shall obtain the written consent of each such Initial
Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso),
a waiver or consent to depart from the provisions hereof, with
respect to a matter, which relates exclusively to the rights
of Holders whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly
affect the rights of other Holders, may be given by the
Majority Holders, determined on the basis of Notes being sold
rather than registered under such Registration Statement.
20
<PAGE> 22
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by
hand-delivery, first-class mail, telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current
address given by such holder to the Company
in accordance with the provisions of this
Section 10(c), which address initially is,
with respect to each Holder, the address of
such Holder maintained by the registrar
under the Indentures or the Exchange Note
Indentures, as the case may be, with a copy
in like manner to Morgan Stanley & Co.
International Limited;
(ii) if to the Initial Purchasers, initially
at the respective addresses set forth in the
Purchase Agreement; and
(iii) if to the Company, initially at its
address set forth in the Purchase Agreement.
All such notices and communications shall be
deemed to have been duly given when received.
The Initial Purchasers or the Company by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the successors and assigns of
each of the parties hereto, including, without the need for an
express assignment or any consent by the Company thereto,
subsequent Holders of Notes and/or Exchange Notes. The Company
hereby agrees to extend the benefits of this Agreement to any
Holder of Notes and/or Exchange Notes and any such Holder may
specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed
to be an original, and all of which taken together shall
constitute one and the same agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York applicable to agreements made and to be performed in
said State (without reference to the conflict of law rules
thereof).
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or
21
<PAGE> 23
unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every
other respect and the remaining provisions hereof shall not be
in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal
amount at maturity of Notes or Exchange Notes is required
hereunder, Notes or Exchange Notes, as applicable, held by the
Company or its Affiliates (other than subsequent Holders of
Notes or Exchange Notes if such subsequent Holders are deemed
to be Affiliates solely by reason of their holdings of such
Notes or Exchange Notes) shall not be counted in determining
whether such consent or approval was given by the Holders of
such required percentage.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto with respect to the
subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration
rights granted with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such
subject matter.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NTL COMMUNICATIONS CORP.
By: /s/ Richard J. Lubasch
------------------------------------
Name: Richard J. Lubasch
Title: Executive Vice President,
General Counsel and Secretary
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
SALOMON BROTHERS INTERNATIONAL LIMITED
By: MORGAN STANLEY & CO. INTERNATIONAL LIMITED
By: /s/ Donal Quigley
----------------------------------
Name: Donal Quigley
Title: Executive Director
<PAGE> 25
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Exchange Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined herein) and ending on the close of business on the 180th day following
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
A-1
<PAGE> 26
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution."
B-1
<PAGE> 27
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business on the 180th day
following the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or by a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Registered Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Act and any profit of any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Act.
[Add information required by Regulation S-K Items 507 and/or 508.]
C-1
<PAGE> 28
ANNEX D
Rider A
-------
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________
Address:______________________________________________________________
______________________________________________________________
Rider B
-------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act.
D-1
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 333- ) and related Prospectus of NTL
Communications Corp for the registration of 9 1/4% senior notes due 2006,
9 7/8% senior notes due 2009 and 11 1/2% senior deferred coupon notes due 2009
and to the incorporation by reference therein of our report dated March 26,
1999, with respect to the consolidated financial statements and schedules of
NTL Communications Corp. included in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 21, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Communications Corp.
on Form S-4 of our report dated February 27, 1998, appearing in the Prospectus,
which is part of this Registration Statement, on the consolidated financial
statements as of December 31, 1997 and for the year then ended of Comcast UK
Cable Partners Limited and subsidiaries.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche
- ------------------------
Philadelphia, Pennsylvania
January 21, 2000
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Communications
Corp. on Form S-4 of our report dated February 27, 1998 (March 16, 1998 as to
Note 3), appearing in the Prospectus, which is part of this Registration
Statement, on the consolidated financial statements as of December 31, 1997 and
for the year then ended of Birmingham Cable Corporation Limited and
subsidiaries.
We also consent to the reference to us under the heading ""Experts'' in
such Prospectus.
/s/ Deloitte & Touche
- ------------------------
Birmingham, England
January 21, 2000
<PAGE> 1
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NTL Communications Corp.
on Form S-4 of our report dated February 27, 1998, appearing in the Prospectus,
which is part of this Registration Statement, on the consolidated financial
statements as of December 31, 1997 and for the year then ended of Cable London
PLC and subsidiaries.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche
- ------------------------
London, England
January 21, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated June 5, 1998 (except Note 10 as to which the date is
July 16, 1998) with respect to the financial statements of ComTel UK Finance
B.V., and of our report dated June 5, 1998 (except Note 9 as to which the date
is July 16, 1998) with respect to the combined financial statements of
Telecential Communications (Canada) Limited and Telecential Communications (UK)
Limited, incorporated in the Registration Statement on Form S-4 on to be filed
by NTL Communications Corp. relating to an offering to exchange an aggregate
principal amount of up to E250,000,000 of new 9 1/4% Series B senior notes due
2006 for a like amount of old 9 1/4% senior notes due 2006; an aggregate
principal amount of up to E350,000,000 of new 9 7/8% series B senior notes due
2009 for a like amount of old 9 7/8% senior notes due 2009; and an aggregate
principal amount of up to E210,000,000 at maturity of new 11 1/2% series B
senior deferred coupon notes due 2009 for a like amount of old 11 1/2% senior
deferred coupon notes due 2009.
/s/ Deloitte & Touche
- ------------------------
Deloitte & Touche
Chartered Accountants
Bracknell, England
January 24, 2000
<PAGE> 1
EXHIBIT 23.6
24 January 2000
We hereby consent to the use in this Registration Statement on Form S-4 of NTL
Communications Corp. of our report, dated 5 June 1998, except for Note 10 as to
which the date is 16 July 1998, relating to the combined financial information
of ComTel UK Finance B.V. as of and for the year ended 31 December 1996, which
appears in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ Coopers & Lybrand
Coopers & Lybrand
Chartered Accountants
London, United Kingdom
<PAGE> 1
-------------------------------------------------------------------
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 EAST 59TH STREET, 26TH FLOOR
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
9 1/4% SENIOR NOTES DUE 2006
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of January 2000.
THE CHASE MANHATTAN BANK
By /s/Andrew M. Deck
-----------------
Andrew M. Deck
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1999,
in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of
the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ...............................................$ 13,497
Interest-bearing balances ....................................... 6,388
Securities: .........................................................
Held to maturity securities........................................... 798
Available for sale securities......................................... 48,655
Federal funds sold and securities purchased under
agreements to resell ............................................ 30,373
Loans and lease financing receivables:
Loans and leases, net of unearned income $132,392
Less: Allowance for loan and lease losses 2,463
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 129,929
Trading Assets ....................................................... 47,413
Premises and fixed assets (including capitalized
leases).......................................................... 3,287
Other real estate owned .............................................. 26
Investments in unconsolidated subsidiaries and
associated companies............................................. 185
Customers' liability to this bank on acceptances
outstanding ..................................................... 716
Intangible assets .................................................... 2,693
Other assets ......................................................... 15,430
--------
TOTAL ASSETS ......................................................... $299,390
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C> <C>
Deposits
In domestic offices ............................................. $100,324
Noninterest-bearing ............................... $41,601
Interest-bearing .................................. 58,723
-------
In foreign offices, Edge and Agreement
subsidiaries and IBF's .......................................... 88,064
Noninterest-bearing .................................... $ 6,363
Interest-bearing .................................. 81,701
Federal funds purchased and securities sold under agree-
ments to repurchase .................................................. 35,773
Demand notes issued to the U.S. Treasury ............................. 892
Trading liabilities .................................................. 33,565
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ................... 4,434
With a remaining maturity of more than one year
through three years............................................ 14
With a remaining maturity of more than three years............... 97
Bank's liability on acceptances executed and outstanding.............. 716
Subordinated notes and debentures .................................... 5,429
Other liabilities .................................................... 11,457
-------
TOTAL LIABILITIES .................................................... 280,765
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 11,016
Undivided profits and capital reserves ............................... 7,333
Net unrealized holding gains (losses)
on available-for-sale securities ..................................... (951)
Accumulated net gains (losses) on cash flow hedges.................... 0
Cumulative foreign currency translation adjustments .................. 16
TOTAL EQUITY CAPITAL ................................................. 18,625
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................. $299,390
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
WILLIAM B. HARRISON, JR. ) DIRECTORS
SUSAN V. BERRESFORD )
-5-
<PAGE> 1
---------------------------------------------------------------------------
Exhibit 25.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 EAST 59TH STREET, 26TH FLOOR
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
9 7/8% SENIOR NOTES DUE 2009
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of January 2000.
THE CHASE MANHATTAN BANK
By /s/ Andrew M. Deck
------------------
Andrew M. Deck
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30,
1999, in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ............................................... $ 13,497
Interest-bearing balances ....................................... 6,388
Securities: .........................................................
Held to maturity securities........................................... 798
Available for sale securities......................................... 48,655
Federal funds sold and securities purchased under
agreements to resell ............................................ 30,373
Loans and lease financing receivables:
Loans and leases, net of unearned income $132,392
Less: Allowance for loan and lease losses 2,463
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 129,929
Trading Assets ....................................................... 47,413
Premises and fixed assets (including capitalized
leases).......................................................... 3,287
Other real estate owned .............................................. 26
Investments in unconsolidated subsidiaries and
associated companies............................................. 185
Customers' liability to this bank on acceptances
outstanding ..................................................... 716
Intangible assets .................................................... 2,693
Other assets ......................................................... 15,430
--------
TOTAL ASSETS ......................................................... $299,390
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C> <C>
Deposits
In domestic offices ............................................. $100,324
Noninterest-bearing ............................... $41,601
Interest-bearing .................................. 58,723
In foreign offices, Edge and Agreement
subsidiaries and IBF's .......................................... 88,064
Noninterest-bearing .....................................$ 6,363
Interest-bearing ................................... 81,701
Federal funds purchased and securities sold under agree-
ments to repurchase .................................................. 35,773
Demand notes issued to the U.S. Treasury ............................. 892
Trading liabilities .................................................. 33,565
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less........ ........... 4,434
With a remaining maturity of more than one year
through three years....................................... 14
With a remaining maturity of more than three years............. 97
Bank's liability on acceptances executed and outstanding 716
Subordinated notes and debentures .................................... 5,429
Other liabilities .................................................... 11,457
TOTAL LIABILITIES .................................................... 280,765
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 11,016
Undivided profits and capital reserves ............................... 7,333
Net unrealized holding gains (losses)
on available-for-sale securities ..................................... (951)
Accumulated net gains (losses) on cash flow hedges.................... 0
Cumulative foreign currency translation adjustments .................. 16
TOTAL EQUITY CAPITAL ................................................. 18,625
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................. $299,390
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
WILLIAM B. HARRISON, JR. ) DIRECTORS
SUSAN V. BERRESFORD )
-5-
<PAGE> 1
-------------------------------------------------------------------
Exhibit 25.3
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
NTL COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 52-1822078
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
110 EAST 59TH STREET, 26TH FLOOR
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 7th day of January 2000.
THE CHASE MANHATTAN BANK
By /s/Andrew M. Deck
-----------------
Andrew M. Deck
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1999,
in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of
the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ...............................................$ 13,497
Interest-bearing balances ....................................... 6,388
Securities: .........................................................
Held to maturity securities........................................... 798
Available for sale securities......................................... 48,655
Federal funds sold and securities purchased under
agreements to resell ............................................ 30,373
Loans and lease financing receivables:
Loans and leases, net of unearned income $132,392
Less: Allowance for loan and lease losses 2,463
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 129,929
Trading Assets ....................................................... 47,413
Premises and fixed assets (including capitalized
leases).......................................................... 3,287
Other real estate owned .............................................. 26
Investments in unconsolidated subsidiaries and
associated companies............................................. 185
Customers' liability to this bank on acceptances
outstanding ..................................................... 716
Intangible assets .................................................... 2,693
Other assets ......................................................... 15,430
--------
TOTAL ASSETS ......................................................... $299,390
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C> <C>
Deposits
In domestic offices ............................................. $100,324
Noninterest-bearing ............................... $41,601
Interest-bearing .................................. 58,723
-------
In foreign offices, Edge and Agreement
subsidiaries and IBF's .......................................... 88,064
Noninterest-bearing .................................... $ 6,363
Interest-bearing .................................. 81,701
Federal funds purchased and securities sold under agree-
ments to repurchase .................................................. 35,773
Demand notes issued to the U.S. Treasury ............................. 892
Trading liabilities .................................................. 33,565
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ................... 4,434
With a remaining maturity of more than one year
through three years....................................... 14
With a remaining maturity of more than three years............. 97
Bank's liability on acceptances executed and outstanding 716
Subordinated notes and debentures .................................... 5,429
Other liabilities .................................................... 11,457
TOTAL LIABILITIES .................................................... 280,765
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 11,016
Undivided profits and capital reserves ............................... 7,333
Net unrealized holding gains (losses)
on available-for-sale securities ..................................... (951)
Accumulated net gains (losses) on cash flow hedges.................... 0
Cumulative foreign currency translation adjustments .................. 16
TOTAL EQUITY CAPITAL ................................................. 18,625
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................. $299,390
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
WILLIAM B. HARRISON, JR. ) DIRECTORS
SUSAN V. BERRESFORD )
-5-
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
NTL COMMUNICATIONS CORP.
OFFER FOR ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
9 1/4% SERIES B SENIOR NOTES DUE 2006
AND
9 7/8% SENIOR NOTES DUE 2009
IN EXCHANGE FOR
9 7/8% SERIES B SENIOR NOTES DUE 2009
AND
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
IN EXCHANGE FOR
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED , 2000
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To:
THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
In New York
<TABLE>
<S> <C> <C>
By Facsimile: By Mail, By Hand and Overnight Courier: Confirm by Telephone:
(212) 638-7380 The Chase Manhattan Bank Carlos Esteves: (212) 638-0828
(212) 638-7381 Corporate Trust-Securities Window (212) 638-0454
Room 234-North Building
55 Water Street
New York, New York 10041
</TABLE>
<TABLE>
<S> <C>
In London
By Mail, By Hand and Overnight Courier: By Facsimile:
The Chase Manhattan Bank 44 171 777 5410
Attn: Operations Manager
Trinity Tower Confirm by Telephone:
9 Thomas More Street Operations Manager: 44 171 777 5414
London E1 9YT
</TABLE>
<TABLE>
<S> <C> <C>
In Luxembourg
By Facsimile: By Mail, By Hand and Overnight Courier: Confirm by Telephone:
(352) 46 26 85380 Chase Manhattan Bank Luxembourg S.A. Operations Manager:
5 Rue Plaetis (352) 46 26 85236
L-2338, Luxembourg
</TABLE>
Delivery of this instrument to an address other than as set forth above, or
transmission of this Letter of Transmittal via facsimile other than as set forth
above, will not constitute a valid delivery of this Letter of Transmittal.
<PAGE> 2
The undersigned acknowledges that he or she has received and reviewed a
prospectus dated , 2000 (the "Prospectus") of NTL Communications
Corp., a Delaware corporation (the "Company"), and this letter of transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange
(1) an aggregate principal amount of up to E250,000,000 of 9 1/4% Series B
Senior Notes due 2006 (the "9 1/4% New Notes") of the Company for a like
principal amount of the issued and outstanding 9 1/4% Senior Notes due 2006 (the
"9 1/4% Old Notes"),
(2) an aggregate principal amount of up to E350,000,000 of 9 7/8% Series B
Senior Notes due 2009 (the "9 7/8% New Notes") of the Company for a like
principal amount of the issued and outstanding 9 7/8% Senior Notes due 2009 (the
"9 7/8% Old Notes") and
(3) an aggregate principal amount at maturity of up to E210,000,000 of
11 1/2% Series B Senior Deferred Coupon Notes due 2009 (the "11 1/2% New Notes"
and together with the 9 1/4% New Notes and the 9 7/8% New Notes, the "New
Notes") of the Company for a like principal amount of the issued and outstanding
11 1/2% Senior Deferred Coupon Notes due 2009 (the "11 1/2% Old Notes" and,
together with the 9 1/4% Old Notes and the 9 7/8% Old Notes, the "Old Notes" and
together with the New Notes, the "Notes") of the Company
from the holders thereof.
Capitalized terms used but not defined herein have the meanings given to
them in the Prospectus.
For each Old Note accepted for exchange and not validly withdrawn, the
holder of such Old Note will receive a New Note having (1) in the case of 9 1/4%
New Notes or the 9 7/8% New Notes, a principal amount equal to that of the
surrendered 9 1/4% Old Notes or the 9 7/8% Old Notes, as the case may be, or (2)
in the case of 11 1/2% New Notes, a principal amount at maturity equal to the
surrendered 11 1/2% Old Notes, as applicable. If the Exchange Offer is not
consummated by September 29, 2000, interest will accrue (in addition to the
stated interest on the 9 1/4% Old Notes and the 9 7/8% Old Notes and in addition
to the accrual of the original issue discount and stated interest on the 11 1/2%
Old Notes) from and including September 29, 2000. Such additional interest (the
"Special Interest"), if any, will be payable in cash semiannually in arrears
each May 15 and November 15, to holders of record on the immediately preceding
May 1 and November 1, respectively, at a rate per annum equal to 0.25% for the
first 90 days of the accrual period, 0.50% for the second 90 days of the accrual
period, 0.75% for the third 90 days of the accrual period and 1.0% for the
remaining portion of the accrual period, of the principal amount of the 9 1/4%
Old Notes and the 9 7/8% Old Notes or the Accreted Value of the 11 1/2% Old
Notes, as the case may be (determined daily). The aggregate amount of Special
Interest payable pursuant to the above provisions will in no event exceed 1.00%
per annum of the principal amount of the 9 1/4% Old Notes and the 9 7/8% Old
Notes or the Accreted Value of the 11 1/2% Old Notes, as the case may be
(determined daily). Upon the consummation of the Exchange Offer after September
29, 2000, the Special Interest payable on the Old Notes from the date of such
consummation will cease to accrue. Following the consummation of the Exchange
Offer, the interest terms shall revert to the original terms set forth in the
Notes. Except as otherwise provided in the Prospectus, Holders of Old Notes
accepted for exchange will be deemed to have waived the right to receive any
other payments or accrued interest, if any, on the Old Notes. The Company
reserves the right, at any time or from time to time, to extend the Exchange
Offer at its discretion, in which event the term "Expiration Date" shall mean
the latest time and date to which the Exchange Offer is extended. The Company
shall notify the holders of the Old Notes of any extension by means of a press
release or other public announcement prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes either if
certificates for such Old Notes are to be forwarded herewith or if a tender is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at either The Depository Trust Company, The Euroclear System or Cedelbank
(each, the "Book-Entry Transfer Facility") pursuant to the procedures set forth
in the Prospectus under "The Exchange Offer -- Book-Entry Transfer" and an
Agent's Message is not delivered. Tenders by book-entry transfer may also be
made by delivering an Agent's Message in lieu of this Letter. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation
(as defined below), which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering Participant, which
acknowledgment states that such Participant has received and agrees to be bound
by, and makes each of the representations and warranties contained in, this
Letter and that the Company may enforce this Letter against such Participant.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or confirmation of the book-entry
tender of their Old
2
<PAGE> 3
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set
2.1
<PAGE> 4
forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures." See Instruction 1. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
3
<PAGE> 5
List and check the appropriate box below the Old Notes to which this Letter
relates. If the space provided below is inadequate, the certificate numbers and
principal amount at maturity of Old Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- ----------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AT AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE MATURITY OF AT MATURITY
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes
represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in
denominations of principal amount at maturity of E1,000 and any integral multiple thereof. See Instruction 1.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF 9 1/4% OLD NOTES ARE BEING TENDERED
[ ] CHECK HERE IF 9 7/8% OLD NOTES ARE BEING TENDERED
[ ] CHECK HERE IF 11 1/2% OLD NOTES ARE BEING TENDERED
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number
------------------------------- Transaction Code Number
-------------------------------
By crediting the Old Notes to the Exchange Agent's account at the
Book-Entry Transfer Facility and by transmitting to the Exchange Agent a
computer-generated message (an "Agent's Message") in which the holder of the Old
Notes acknowledges and agrees to be bound by the terms of, and makes the
representations and warranties contained in, this Letter, the participant in the
Book-Entry Transfer Facility confirms on behalf of itself and the beneficial
owners of such Old Notes all provisions of this Letter (including any
representations and warranties) applicable to it and such beneficial owner as
fully as if it had completed the information required herein and executed and
transmitted this Letter to the Exchange Agent.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which guaranteed delivery
4
<PAGE> 6
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number Transaction Code Number
Name of Tendering Institution
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact with full power of substitution, for purposes of
delivering this Letter and the Old Notes to the Company. The Power of Attorney
granted in this paragraph shall be deemed irrevocable from and after the
Expiration Date and coupled with an interest. The undersigned hereby further
represents that any New Notes acquired in exchange for Old Notes tendered hereby
will have been acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the undersigned, that
neither the holder of such Old Notes nor any such other person is engaged in, or
intends to engage in, or has an arrangement or understanding with any person to
participate in, the distribution (within the meaning of the Securities Act of
1933, as amended (the "Securities Act")) of such New Notes and that neither the
holder of such Old Notes nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of such New Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution (within the meaning of the Securities Act) of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that in reliance on an interpretation by the staff of the SEC, a
broker-dealer may fulfill his prospectus delivery requirements with respect to
the New
5
<PAGE> 7
Notes (other than a resale of an unsold allotment from the original sale of the
Old Notes) with the Prospectus which constitutes part of this Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
6
<PAGE> 8
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be issued in the name of someone other than the
person or persons whose signature(s) appear(s) on the Letter below, or if
Old Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)
--------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
------------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be sent to someone other than the person or
persons whose signature(s) appear(s) on this Letter below or to such
person or persons at an address other than shown in the box entitled
"Description of Old Notes" on this Letter above.
Mail: New Notes and/or Old Notes to:
Name(s)
--------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
7
<PAGE> 9
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated:
<TABLE>
<S> <C>
x , 2000
x , 2000
SIGNATURE(S) OF OWNER DATE
</TABLE>
Area Code and Telephone Number
- -----------------------------------------------------------------------
This Letter must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the Old Notes hereby tendered or on a
security position listing or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME AND FIRM)
Dated:
8
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
9 1/4% SENIOR NOTES DUE 2006
IN EXCHANGE FOR THE
9 1/4% SERIES B SENIOR NOTES DUE 2006
AND
9 7/8% SENIOR NOTES DUE 2009
IN EXCHANGE FOR THE
9 7/8% SENIOR B SENIOR NOTES DUE 2009
AND
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
IN EXCHANGE FOR
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2009
OF NTL COMMUNICATIONS CORP.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Old Notes) either if certificates are to be forwarded herewith or if tenders are
to be made pursuant to the procedures for delivery by book-entry transfer set
forth in the Prospectus under "The Exchange Offer -- Book-Entry Transfer" and an
Agent's Message is not delivered. Tenders by book-entry transfer may also be
made by delivering an Agent's Message in lieu of this Letter. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering Participant, which acknowledgment states that
such Participant has received and agrees to be bound by, and makes the
representations and warranties contained in, this Letter and that the Company
may enforce this Letter against such Participant. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or facsimile hereof or
Agent's Message in lieu thereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth herein
on or prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Old Notes tendered hereby must
be in denominations of principal amount at maturity of E1,000 and any integral
multiple thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
"The Exchange Offer -- Guaranteed Delivery Procedures." Pursuant to such
procedures, (1) such tender must be made through an Eligible Institution, (2)
prior to the Expiration Date, the Exchange Agent must receive from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
or a Book-Entry Confirmation, together with a properly completed and duly
executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with
any required signature guarantees and any other documents required by the Letter
will be deposited by the Eligible Institution with the Exchange Agent, and (3)
the certificates for all physically tendered Old Notes, in the proper form for
transfer, or Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) with any required signature guarantees and all other
documents required by this Letter, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
9
<PAGE> 11
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See the Prospectus under "The Exchange Offer."
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes -- Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this letter, promptly after the
Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE
DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the Holder of the Old Notes tendered hereby,
the signature must correspond exactly with the name as written on the face of
the certificates or on the Book-Entry Transfer Facility's security position
listing as the holder of such Old Notes without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) or bond
powers must be guaranteed by a participant in a securities transfer association
recognized signature program.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (1) BY A REGISTERED HOLDER OF
OLD NOTES WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS"
OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OR (2) FOR THE ACCOUNT OF AN
ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTION.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Holders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
10
<PAGE> 12
Facility as such holder may designate hereon. If no such instructions are given,
such Old Notes not exchanged will be returned to the name or address of the
person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current TIN
or an adequate basis for an exemption, such tendering holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such tendering holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment for taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (1) the holder is exempt from backup withholding, (2) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to a backup withholding as a result of a failure to report all interest
or dividends or (3) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which the TIN
to report. If such holder does not have a TIN, such holder should consult the
W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2
of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter or an
Agent's Message in lieu thereof, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
11
<PAGE> 13
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the addresses indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the addresses and telephone numbers indicated above.
12
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: NTL COMMUNICATIONS CORP.
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
FORMW-9 CERTIFY BY SIGNING AND DATING BELOW.
TIN: --------------------------
(Social Security Number or
Employer Identification Number)
-------------------------------------------------------------------------------------------
PART 2 -- TIN APPLIED FOR [ ]
-------------------------------------------------------------------------------------------
Department of the PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFICATION
Treasury Internal CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT
Revenue Service
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me).
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE ---------------------------------------------- DATE---------------------
- --------------------------------------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified
by the IRS that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administrative Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a Taxpayer Identification Number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- ---------------------------------------------------
- ---------------------------------------------------
Signature Date
13
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
NTL COMMUNICATIONS CORP.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of NTL Communications Corp. (the "Company") made pursuant to a
prospectus dated , 2000 (the "Prospectus"), if certificates for
Old Notes of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Company prior to 5:00 p.m., New York
City time, on the Expiration Date of the Exchange Offer. Such form may be
delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to The Chase Manhattan Bank (the "Exchange Agent") as set forth
below. Capitalized terms not defined herein are defined in the Prospectus.
<TABLE>
<S> <C>
The Exchange Agent is:
In New York
By Facsimile:
By Mail, By Hand and Overnight Courier: (212) 638-7380
(212) 638-7381
The Chase Manhattan Bank
Corporate Trust-Securities Window Confirm by Telephone:
Room 234, North Building
55 Water Street Carlos Esteves: (212) 638-0828
New York, New York 10041 (212) 638-0454
In London
By Mail, By Hand and Overnight Courier:
The Chase Manhattan Bank By Facsimile:
Attn: Operations Manager 44 171 777 5410
Trinity Tower
9 Thomas More Street Confirm by Telephone:
London E1 9YT Operations Manager: 44 171 777 5414
In Luxembourg
By Facsimile:
By Mail, By Hand and Overnight Courier: (352) 46 26 85380
Chase Manhattan Bank Luxembourg S.A. Confirm by Telephone:
5 Rue Plaetis
L-2338, Luxembourg Operations Manager: (352) 46 26 85236
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus, the undersigned
hereby tenders to the Company the principal amount of Old Notes set forth below,
pursuant to the guaranteed delivery procedure described in the Prospectus under
"The Exchange Offer -- Guaranteed Delivery Procedures."
Principal Amount at Maturity of Old Notes
Tendered:*
E
- ---------------------------------------------------
Certificates Nos. (if available):
- ------------------------------------------------------
Total Principal Amount at Maturity
Represented by Old Notes Certificate(s):
E
- ----------------------------------------------------
If Old Notes will be delivered by book-entry transfer to The Euroclear System,
Cedelbank or The Depository Trust Company, provide account number.
Account Number
- -----------------------------------
* Must be in denominations of principal amount at maturity of E1,000 and any
integral multiple thereof. See Instruction 1 in the Letter of Transmittal.
[ ] CHECK HERE IF 9 1/4% OLD NOTES ARE BEING TENDERED
[ ] CHECK HERE IF 9 7/8% OLD NOTES ARE BEING TENDERED
[ ] CHECK HERE IF 11 1/2% OLD NOTES ARE BEING TENDERED
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
2
<PAGE> 3
PLEASE SIGN HERE
<TABLE>
<S> <C>
X ------------------------------
- ------------------------------------------------------------
------------------------------
X DATE
- ------------------------------------------------------------
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY
Telephone Number (including area code):
- -----------------------------------------------------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old
Notes as their name(s) appear(s) on certificates for Old Notes or on a security
position listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby guarantees that the certificates representing the principal
amount of Old Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at either The Euroclear System, Cedelbank or The Depository
Trust Company pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer -- Guaranteed Delivery Procedures," together with one or more
properly completed and duly executed Letters of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof) and any other documents required by
the Letter of Transmittal in respect of the Old Notes, will be received by the
Exchange Agent at the address set forth above, no later than five New York Stock
Exchange trading days after the date of execution hereof.
<TABLE>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------------- ---------------------------------------------------
Address Title
- --------------------------------------------------- Name: -------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. ------------------------ Dated: -------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES
FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99.3
NTL COMMUNICATIONS CORP.
OFFER FOR ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
9 1/4% SERIES B SENIOR NOTES DUE 2006
AND
9 7/8% SENIOR NOTES DUE 2009
IN EXCHANGE FOR
9 7/8% SENIOR B SENIOR NOTES DUE 2009
AND
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
IN EXCHANGE FOR
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2009
To Our Clients:
Enclosed for your consideration is a prospectus dated , 2000
(the "Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of NTL
Communications Corp. (the "Company") to exchange
(1) an aggregate principal amount of up to E250,000,000 of its 9 1/4% Series B
Senior Notes due 2006 for a like principal amount of its issued and
outstanding 9 1/4% Senior Notes due 2006 (the "9 1/4% Old Notes"),
(2) an aggregate principal amount of up to E350,000,000 of its 9 7/8% Series B
Senior Notes due 2009 for a like principal amounts of its issued and
outstanding 9 7/8% Senior Notes due 2009 (the "9 7/8% Old Notes"), and
(3) an aggregate principal amount at maturity of up to E210,000,000 of its
11 1/2% Series B Senior Deferred Coupon Notes due 2009 for a like principal
amount of its issued and outstanding 11 1/2% Senior Deferred Coupon Notes
due 2009 (the "11 1/2% Old Notes" and together with the 9 1/4% Old Notes
and the 9 7/8% Old Notes, the "Old Notes") upon the terms and subject to
the conditions described in the Prospectus. The Exchange Offer is being
made in order to satisfy certain obligations of the Company contained in
the registration rights agreement in respect of the Old Notes, dated
November 24, 1999 by and among the Company and the initial purchasers
referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A tender of
such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 2000, unless extended by the Company
(the "Expiration Date"). Any Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer -- Certain
Conditions of the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, 2000, unless extended by the Company.
<PAGE> 2
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information only
and may not be used directly by you to tender Old Notes.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by NTL
Communications Corp. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF OLD NOTES TENDERED
------------------------------------------------------------
<S> <C>
9 1/4% Senior Notes due 2006 -----------------------------------------------------
9 7/8% Senior Notes due 2009 -----------------------------------------------------
11 1/2% Senior Deferred Coupon Notes due 2009 -----------------------------------------------------
[ ] Please do not tender any Old Notes held by
you for my account. -----------------------------------------------------
Dated: -------------------------, 2000 -----------------------------------------------------
SIGNATURE(S)
-----------------------------------------------------
-----------------------------------------------------
PLEASE PRINT NAME(S) HERE
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
ADDRESS(ES)
-----------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
-----------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NO(S).
</TABLE>
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
3
<PAGE> 1
EXHIBIT 99.4
NTL COMMUNICATIONS CORP.
OFFER FOR ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
9 1/4% SERIES B SENIOR NOTES DUE 2006
AND
9 7/8% SENIOR NOTES DUE 2009
IN EXCHANGE FOR
9 7/8% SERIES B SENIOR NOTES DUE 2009
AND
11 1/2% SENIOR DEFERRED COUPON NOTES DUE 2009
IN EXCHANGE FOR
11 1/2% SERIES B SENIOR DEFERRED COUPON NOTES DUE 2009
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
NTL Communications Corp. (the "Company") is offering, upon and subject to
the terms and conditions set forth in a prospectus dated , 2000
(the "Prospectus"), and the enclosed letter of transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer")
(1) an aggregate principal amount of up to E250,000,000 of its 9 1/4%
Series B Senior Notes due 2006 for a like principal amount of its issued and
outstanding 9 1/4% Senior Notes due 2006 (the "9 1/4% Old Notes"),
(2) an aggregate principal amount of up to E350,000,000 of its 9 7/8%
Series B Senior Notes due 2009 for a like principal amount of its issued and
outstanding 9 7/8% Senior Notes due 2009, (the "9 7/8% Old Notes") and
(3) an aggregate principal amount at maturity of up to E210,000,000 of its
11 1/2% Series B Senior Deferred Coupon Notes due 2009 of the Company for a like
principal amount at maturity of its issued and outstanding 11 1/2% Senior
Deferred Coupon Notes due 2009 (the "11 1/2 Old Notes" and together with the
9 1/4% Old Notes and the 9 7/8% Old Notes, the "Old Notes"). The Exchange Offer
is being made in order to satisfy certain obligations of the Company contained
in the registration rights agreement in respect of the Old Notes, dated November
24, 1999 by and among the Company and the initial purchasers referred to
therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 2000;
2. The Letter of Transmittal for your use and for the information (or
the use, where relevant) of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Chase Manhattan Bank, the
Exchange Agent for Old Notes.
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON 2000, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). THE OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates representing
the Old Notes should be delivered to the Exchange Agent or the book-entry
transfer procedures should be complied with, all in accordance with the
instructions set forth in the Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer -- Guaranteed delivery procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Chase
Manhattan Bank, the Exchange Agent for the Old Notes, at its addresses and
telephone numbers set forth on the front of the Letter of Transmittal.
Very truly yours,
NTL COMMUNICATIONS CORP
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
